An effective license position, usually shortened to ELP, is the single most useful document in software asset management. It answers a simple question for each product: do we own more than we use, or use more than we own? The first means you are wasting money. The second means you are exposed in an audit. An ELP tells you which, and by how much.
What goes into an ELP
An ELP combines three inputs for every product:
- Entitlements: what your contracts grant, including quantity, metric and use rights. See our guide to software entitlements.
- Consumption: what you actually deploy or assign, counted using the same metric.
- Rules: the publisher's terms that adjust the count, such as downgrade rights, rights for test environments, or how virtualization is treated.
The result for each product is a number: entitlements minus consumption. Positive means surplus. Negative means deficit.
A worked example
The exhibit shows a simplified position for a mid-sized organization across five products.
In this example, Salesforce carries more than a thousand licenses that are either idle or unassigned, a clear savings opportunity. The database server looks fully used, but the position shows it is running on more cores than are licensed, which is exactly the kind of gap a publisher audit would find.
An ELP turns "we think we're fine" into a number per product: plus means money to recover, minus means risk to fix.
How to build an ELP in six steps
- Choose the scope
Start with your top five vendors by spend, plus any publisher known to audit actively. Flexera's 2025 survey found that half of organizations had been audited by Microsoft in the previous three years.
- Collect entitlements
Gather contracts, amendments and proof of entitlement. Record product, edition, quantity, metric and term.
- Collect consumption
Pull data from identity providers, device management, server inventory and SaaS admin consoles, counted in the same metric as the entitlement.
- Normalize names
Make sure "Microsoft Office 365 E3", "O365 E3" and "Microsoft 365 E3" are recognized as the same product. See software normalization.
- Apply the rules
Account for downgrade rights, secondary-use rights, test and development terms, and virtualization rules.
- Calculate and review
Produce surplus or deficit per product, then review unusual results with the people who run the systems.
For a first ELP across five vendors, the effort is usually concentrated in the middle steps, collecting and cleaning data, rather than in the calculation itself.
Common pitfalls
Installations against a per-user entitlement produce a meaningless position.
A license assigned to someone who left six months ago counts as consumed but is pure waste.
Test, development and disaster-recovery systems may or may not need licenses, depending on the terms.
Licenses from expired contracts, or from a divested business unit, should not be counted.
An upgraded license usually replaces the original; counting both inflates the position.
An ELP built once and never updated is out of date within months.
What to do with the result
| Position | What it means | Typical action |
|---|---|---|
| Large surplus | Paying for licenses nobody uses | Reclaim, reduce at renewal, or reallocate |
| Small surplus | Healthy buffer for growth | Monitor |
| Balanced | Use matches entitlement | Keep reviewing quarterly |
| Deficit | Using more than you own | Remediate quickly: remove, reassign or buy before an audit |
How MI One helps
Frequently asked questions
How often should an ELP be updated?
Quarterly for most vendors, and before every renewal or true-up. With connected data sources it can be continuous.
Is an ELP the same as a compliance report?
Close. An ELP is your own calculation of your position. A compliance report is often the formal output of an audit, prepared by or for the publisher.
Should we share our ELP with a publisher?
Only with care and preferably with expert advice. Your ELP is internal working material; what you share in an audit should be reviewed first.
Sources
- Flexera, 2025 State of ITAM Report press release, June 18, 2025. https://www.flexera.com/about-us/press-center/it-teams-losing-visibility-according-to-flexera-2025-state-of-itam-report