Licensing As a Service – Why It’s the Modern Way of Software Licensing
13th December 2021
Cloud-based Software Licensing | The Modern Way
18th August 2022
Key factors to be aware of before you decide
To build or buy a licensing system - that is the question all growing software vendors will face. We wrote a blog about this huge decision with the pros and cons of both options, to help you make an informed decision.
Introduction
Software is a ubiquitous part of running a modern business. Deciding on the right mix of software tools and services to use that help move your business forward is no easy task. Not only do they have to be fit for purpose but they also have to fit clearly and cleaning into the mix of other tools and processing within your business.
If you are a software publisher with in-house software engineering skills, the problem is made all the more difficult by the fact that you can build the tools that you need to move your business forward, rather than buying them from a 3rd party vendor.
But should you?
The Buy vs. Build conundrum is seemingly a difficult one to resolve and it is a common one when it comes to deciding whether to build or buy your own software licensing management system. This post is designed to help you think through the pros and cons of each approach.
What Is a Software Licensing System and Who Needs It
A software licensing system is a digital tool that empowers independent software vendors or other organizations to control access to the software applications, devices, data or technical services that they provide to customers.
A good software licensing management system ensures that customers are in compliance with their terms, under which they licensed an application is easy to configure and deploy and is easy to manage for both licensor and licensee.
No matter the size of your operation, and depending on the quality of your licensing system, the cumulative cost of managing licenses, on-premise license servers, keys and support requests can quickly add up. Ensuring that your business has a fit-for-purpose license system in place can have a massive impact on your business both in terms of running costs, and enabling frictionless revenue growth.
It’s a big decision - so should you build or buy a software licensing system?
Build It
The build-it option involves either contracting a software development house to build a software licensing platform to fit your specific requirements and business case or using your own internal engineering resource to build it.
Benefits
The benefits that accrue from building your own solution include:
Specificity: If scoped correctly, the delivered software will fit your requirements and prove to be fit for the key purpose you selected it for.
Modernity: Developing a fresh licensing management system will let you integrate new tech advancements and standards with greater ease than retrofitting them to an established tool.
Ownership: if you built it, you own it, great!
Drawbacks
Internal Cost: The development of a license mangement system is a gruelling, time-consuming and exacting process. If this is being developed in-house, this can burn precious engineering resources and pull members of your team away from progressing on your own apps. If it is outsourced, you will nevertheless rely on internal resources to specify the solution, project manage its delivery and then test the subsequent delivery. All of this pulls resources away from other task your team could be working on.
Ongoing Support: Once the solution is built, it needs to be extensively tested, debugged and patched to keep it fit for purpose. And new feature requests will emerge from within the rest of your business that will have to be specified, estimated, prioritized, developed and tested. While this lets you keep full oversight of the system, it will continue to burn resources and can cause a logjam with your work, particularly if your ‘core’ business is selling other software applications to customers
Risk Developing any piece of software is as much of an art as a science. If you do not scope out the project properly, validate your design and test thoroughly, it can result in the delivery of a platform that does not optimise your processes or may even make things more difficult than when you started!
Buy One
The alternative to building your own software license system is of course to buy an off-the-shelf solution from a third-party vendor. In this scenario too there are pros and cons and here we try to objectively summarize them:
Benefits
Ease of Use: Working with your provider will allow you to ensure that most if not all of your requirements are met. Off the shelf license systems are built and ready to go, perhaps involving some integration. But they should get you up and running more quickly than building your own solution.
Leading edge features: any solution worth its salt should be well suited to both your needs as a customer and also the needs of the companies to which you sell licenses. A 3rd party solution should give you access to the best software licensing system features in the market so that you are able to most efficiently sell your products with the least amount of hassle.
Lack of Maintenance: depending on the license terms of the license system you go for, maintenance should not be an issue, particularly with the rise of cloud-based license systems that are provided on a SaaS basis. The vendor worries about maintaining and upgrading the product so you don’t have to.
Expertise and guidance: Choosing a tool from an experienced vendor means that you will be able to make use of their specialised experience and pick out a tool that best addresses your requirements. This can help deal with a number of pain points, including:
- User migration
- Organization migration
- License/entitlement migration
- Incorporating any user authentication layer and MFA
- Connecting to other business systems such as CRM, ERP or business intelligence tools
- Understanding and analyzing user behavior and license usage
Drawbacks
Payment: clearly, a 3rd party licensing system will require you to get your check-book out. Depending on the cost of the solution, when compared with an honest comparison of the true internal cost of developing a bespoke solution, it will likely come out cheaper in the long run.
Integration and/or customization time and cost: an off-the-shelf solution is designed to serve a wider number of customers using the same product. As a result it may not fit your requirements exactly. As a result, you'll need to look at the trade-off between getting a purpose-built but likely more expensive customer tool with a purchased tool that may only cover 90% of your requirements.
Key questions to ask in this scenario are: can the 3rd party tool be customized to give you exactly what you want and if so, what are the costs of this?
Types of 3rd Party solutions
There are three key types of software license management.
Software Key Based Solutions: These provide what is known as a licence key protection framework to protect the integrity of your software. They rely on licensing servers both on your premise and with the customer. These services are offered by providers such as Flexera and Reprise.
Subscription Management Systems: These allow the ability to efficiently manage subscription-based licenses, typically for lower-value items. They also bundle in payment automation, and basic user analytics and fraud-detection tools into the same package. Such services are offered by providers Conclusion
Deciding whether to build or buy is not a decision to be taken lightly. It can be very tempting for a company that writes software to start building its own software licensing management system. However, the solutions provided by 3rd party vendors have seen a wave of innovation in the past few years and cost effective, easy to integrate solutions that offer advanced features are now available with none of the hassle or cost of an internally built solution.
Before embarking on an internal self-build, we recommend checking out a couple of license management vendors to see what they can do. If you want to learn more about how our team at 10Duke can help with your software requirements, you can view our full list of solutions options from here along with our licensing solution - 10Duke Entitlements.
Learn the Basics of 10Duke Software Licensing
Conclusion
Deciding whether to build or buy is not a decision to be taken lightly. It can be very tempting for a company that writes software to start building its own software licensing system. However, the solutions provided by 3rd party vendors have seen a wave of innovation in the past few years and cost effective, easy to integrate solutions that offer advanced features are now available with none of the hassle or cost of an internally built solution.
Before embarking on an internal self-build, we recommend checking out a couple of license management vendors to see what they can do. If you want to learn more about how our team at 10Duke can help with your software requirements, you can view our full list of solutions options from here along with our licensing solution - 10Duke Entitlements.
Are you a software developer looking to sell more?
Learn more from our guides:
Software Monetization Guide – How to Monetize Software?
Software Licensing Guide – Why is it so important?
Why Software Companies Should Consider the Subscription Business Model
What is a Software License Manager? [Guide]
Software Licensing Solutions – Guide
Software Licensing Models – Ultimate Guide to Software License Types
Customer Identity and Access Management – What should a good CIAM solution provide?
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To build or buy a licensing system – the huge question all growing software vendors will face. This blog will help you make an informed decision.