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Licensing as a Service (LaaS) can offer software vendors many advantages over developing a licensing engine in-house. The aim of this blog post is to develop an understanding why the concept of software Licensing as a Service has emerged, and why it is worth considering for any software company.
LaaS enables you to support a wide variety of license models and application types and allows you immediate access to a best-of-breed solution that you pay for either monthly or based on what you use.
License Management as a Service could overcome many, if not all, of the limitations created by more traditional licensing methods such as dongles. It also offers software publishers more flexible and effective means of monetizing their software products quickly and easily.
Software Licensing - How Did We Get Here?
To understand the advantages of LaaS, a bit of background to software licensing in general is needed. If you're already familiar with it, feel free to skip ahead a couple of chapters.
If you are an independent software vendor (ISV) or a software publisher you will most likely want to monetize the software application you have developed.
The terms under which you provide your software to a customer are defined by the software license - how much the customer has to pay, for how long, which versions of your application does their license apply to, etc.
Historically, a lot of software products were licensed on a perpetual license under which the customer paid once, but then could pay an option annual maintenance fee to continue to receive newer versions of the application, bug fixes and perhaps some support. As more and more software is being provided online, there has been a shift away from the limitations of perpetual software licensing to much more sophisticated licensing models that are better suited to the software product being sold.
In order to overcome the limitation of traditional software licensing services and to capitalise on the opportunities created for software publishers by the Internet, a new method of software licensing has emerged called Licensing as a Service (LaaS).
What Are the Traditional Methods For Licensing Software?
The simplest way to license software is to have a written paper license agreement between the software vendor and the customer. The vendor would then trust that the customer will comply with the terms of the software license and, normally, the software license would contain some right of audit, under which the vendor could do an occasional 'spot check' to ensure that the customer was using the software in a manner consistent with the agreed software license.
The obvious drawbacks of such an approach include a lack of scalability (paper contracts are slow to process), significant room for abuse (it's tricky to audit a customer without irritating them) and if the software was distributed, it is impossible to limit unauthorised use by anyone who manages to get a copy.
In order to address these issues, software vendors turned to digital solutions such as License Dongles and License Servers. Dongles are electronic / hardware-based protection locks initially introduced by software businesses to protect and prevent unauthorised usage or unwanted distribution of their high-value software applications (normally desktop apps).
A software license server on the other hand, is a centralised computer application that provides access to end-client computers. It does this by checking the number of copies of a software programme that an organisation is permitted to use.
While in theory dongles and servers seemed to work well, they turned out to have significant limitations. For example, with dongles someone had to keep track of them being issued and returned. Additionally, they could be transferred between people in the same company so they didn't prevent software abuse within a customer site.
Along with dongles, license servers can get damaged or simply wear out and have to be replaced. Furthermore, they had to be physically deployed to a customer site, which brings problems within today’s current digital market. For more information on the limitations of license dongles, click here.
Software license keys are another method of software licensing. Only users that have acquired the appropriate license will be issued with a license key enabling them to install or use the software (also known as software activation). Similar to license servers and license dongles, they are an outdated method of software licensing, as they come with huge amounts of inconvenience, for example they need to be entered whenever a program is installed and the user must also be sure not to lose them.
What Is Licensing as a Service (LaaS)?
Licensing as a Service is simply licensing on a SaaS basis. Software as a Service (SaaS) is a software distribution model that allows end-users to access software products over the internet. With LaaS, you can outsource the responsibility of enforcing the terms of the software license to the Licensing as a Service provider, for example 10Duke.
This means you don't have to worry about licensing in-house or having to develop licensing features on top of the core software application. One of the biggest issues when it comes to in-house licensing is that it can become very time consuming and drains your resources away from your core product (learn more about the drawbacks of building a licensing system here). The LaaS provider takes care of software license enforcement while you remain in complete control of the terms under which your software is licensed to end customers.
Software Licensing companies who provide License Management as a Service will typically offer many of the same capabilities offered by any Software as a Service (SaaS) provider - but with specific reference to the aspects of licensing software. This includes general SaaS features like cloud-based delivery, global coverage, monthly or consumption-based billing, and web-based configuration.
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What License Models Are Supported?
One of the big advantages of working with a software licensing specialist is that they will typically support a wide variety of license models. This means that the software vendor can simply select the license model best suited to their product and customer base, such as the number of end users, the price paid, time elapsed, and geographic locations in which the software can be used.
While the current trend is to deploy subscription-based license models, not all software products are best sold on a subscription basis and a LaaS provider can facilitate alternative models that enable a software product to be monetized more effectively. This is particularly the case in a business to business context as well as large-scale consumer offerings.
Some examples of licensing models that a typical LaaS provider can offer includes common models such as perpetual and subscription, but also more complex models such as floating licenses, corporate on-demand licenses, offline usage (a license model well-suited for the construction or mining industries), aggregate use time licenses, concurrent usage, and more.
How Do You Work With a Licensing as a Service Provider?
The whole point of working with Software Licensing companies is that software vendors can focus on their application and let the LaaS provider take care of licensing.
In practice, this normally involves a small integration between the application and the LaaS provider's engine, an integration to a 3rd party e-commerce provider such as Stripe or FastSpring if the software vendor wants to accept online payments, an integration to the CRM or ERP system in order to keep customer information in sync for the vendor, and that's pretty much it. The new licensing solution is then typically deployed to software vendor's existing customers at the next application update or immediately for new customers.
10Duke Enterprise is the go-to Licensing as a Service solution
10Duke Enterprise is a powerful cloud-based licensing solution designed for fast-growing software businesses. It is the go-to solution for Licensing as a Service.
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What Advantages Come From Using a Licensing as a Service Provider?
Access to a best of breed licensing solution that just has to be configured and integrated rather than developed from scratch, saving time and money.
Access to license models that the software vendor may not have thought of or considered for their software product that may help to better monetize it.
Summary
Working with a Licensing as a Service (LaaS) provider can offer software vendors many advantages over developing a licensing engine in-house. These range from being able to support a wide variety of license models and application types to getting immediate access to a best-of-breed solution that you pay for monthly or based on what you use.
LaaS providers are able to overcome many, if not all, of the limitations created by more traditional licensing methods such as dongles and offer software publishers a more flexible and effective means of monetizing their software products quickly and easily.
10Duke Enterprise is a LaaS solution that helps software vendors monetize their products. If you are looking for a modern software licensing provider or you have any questions, don’t hesitate to get in touch or schedule a demo with our experts.
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Are you a software developer looking to sell more? Learn more from our guides:
Should You Build Or Buy a Licensing System?
How to Monetize Software Products?
Guide to Software Licensing – Basics Explained
Software Licensing Solutions – Buyer’s Guide
Software Licensing Models – Ultimate Guide
What Is Software License Management?
Customer Identity and Access Management – What should a good CIAM solution provide?
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Licensing as a Service, a new method of software licensing, offers flexible and effective means of monetizing software products quickly and easily.