A software licensing solution allows companies that write, publish and sell software applications to easily issue, manage and revoke the licenses that they provide to their customers.
The aim of this article is to define what software licensing solutions are and what they should be able to do in the modern online world. We'll first look at what licensing solutions are used for and then compare traditional solutions to more modern ones.
What Does a Software Licensing Solution Do?
A software licensing solution enables an independent software vendor (ISV) to license the application it has developed to their customer on specific business terms.
The software licensing solution is used to ensure that the application can then only be used by the customer on those specific license terms.
Examples of How a Licensing Solution Works
For example, if a customer has purchased a license for 30 days of access to a web-based application for one person, the software licensing solution is used by the provider of that application to ensure that only this person can access the application for that specific period of time only.
It then ensures that after the 30 days have passed, access to the application is no longer granted.
A similar, but more complex scenario might be a customer that has bought 5 seats to a desktop application on a floating license basis for use across 15 of its employees.
The software licensing solution would ensure that only 5 of the 15 employees would be able to access the software application at any one time.
This is one example of how a licensing solution works when used to enforce a floating license model, irrespective of application type. It can be used for desktop applications, web applications, mobile applications, virtual machines and even APIs.
Traditional Software Licensing Solutions Are Slowly Killing Your Business
Traditional software licensing solutions are outdated and cumbersome in the modern, hyper fast-paced online world.
More and more independent software vendors are moving away from these so-called ‘flexible’ licensing solutions to more modern solutions that offer genuine flexibility in the multi-app, multi-platform 21st century.
Knowing how to license your software is critical and you need to get it right, for both you and your customers. For you as the software publisher, it’s your software applications that you worked so hard to plan, design, implement, test, debug, deploy, iterate and deploy again that are the lifeblood of your company and its employees.
It’s your applications that are purchased by your customers and it’s this software revenue that pays salaries, keeps the lights on, allows you to invest in even better products and continue on the path to corporate greatness.
These products need to be protected by an effective software licensing solution that both serves to maximize revenue as well as protect your Intellectual Property (IP) from unauthorised use.
You’ll want to ensure that your customers are using your software products legally, but also that they aren’t paying for licenses they don’t need. Acquiring too many licenses wastes their resources, but not having enough leaves them open to a potential lawsuit.
In many cases, over-usage has less to do with a company deliberately trying to avoid paying license fees, and more to do with their inability to track or understand their own usage of applications internally.
But on the other hand, isn’t it your problem, as the software provider, to ensure that your customers have paid enough for their licenses? Why should it be your customer’s responsibility, especially when you’re the one trying to make a profit from those licenses?
Traditional software licensing solutions that rely on software license keys or license dongles fail to address any of these issues for either software vendors or their customers.
They fail to protect the IP of the ISV and offer no ability to ensure an accurate match between usage and license fees paid. For the customer, they significantly increase software downtime, can’t offer flexible or granular usage models, and can become a major support issue.
How Do Traditional Software Licensing Solutions Work?
Traditional software licensing solutions rely on heavy manual processes for license generation and license reconciliation for desktop applications. Typically there will be an entitlement representation system within the ISV back-office that allows access rights to be defined and that generates the license keys.
There also needs to be some sort of record or database view of the rights and entitlements for each customer, which requires deployment and management by the customer. Keeping these systems in sync when onboarding new users and particularly when end-users change within the customer company, can become a significant headache for both parties.
So let’s say that you’re a software vendor and you just landed a great new customer who agrees to buy 10 licences. With traditional software licensing solutions you would generate 10 new license keys using your back office system. Details of these licenses are then added to a spreadsheet as well as being added to a CRM system like Salesforce.
Problems With Traditional Software Licensing Solutions
Lots of Manual Processes
Here’s where the problems begin. Most of them are related to manual processes you (and your customer!) need to go through in order to ensure you’re getting paid for the licenses you’ve sold and your customers have access to the product.
In other words, there is no single source of truth with regards to license usage, and the following issues stem from this main problem.
Manual Syncing
It’s unlikely that you would have a MAC address, dongle or email address to tie the rights and entitlements to at the outset. So when you eventually obtain this information your spreadsheets and CRM system will need to be updated with the unique identifiers.
You’ll also need to update your database every time the rights and entitlements of your customers change.
In the long run, this approach does not scale.
Manual Delivery of License Keys
Once you’ve generated and recorded your license keys they still need to be physically delivered to your customer, most likely by email, or even with a physical license dongle.
This could mean sending out license keys directly to individual end users for them to install and activate. Perhaps this will be done centrally by IT, but nonetheless an additional party needs get involved.
Regardless of the delivery system, licenses then have to be manually installed within the end-users machines, devices or network so that they are eventually able to use the software.
And if some piece of information in this process doesn’t match, that’s an immediate support ticket for you.
Manual Rescinding of Usage Rights…
Even if you’re using license servers like FlexNet, there’s lots of infrastructure, lots of manual processes and lots of wasted resources.
What’s even more frustrating is that when you want to upgrade (or downgrade) entitlements, you basically have to go through the whole process all over again, sometimes with the end customer having to uninstall licenses explicitly and then install the new ones.
This whole process significantly increases software downtime and can become a major support issue for both you and your customer.
…and You Still Don’t Know For Sure Who’s Using What
If your end-user decommissions a piece of hardware and wants to switch the entitlements from a decommissioned MAC address to a new MAC address, there’s no way to reliably destroy prior access rights.
Software vendors simply have to trust that end users are not using license keys on decommissioned machines and only using them on the new ones.
This is because there isn’t really a concept of a user identity in the system.
The inability to reliably rescind usage rights is a huge problem with traditional licensing solutions.
10Duke Enterprise overcomes all of the headaches associated with traditional software licensing solutions
As well as reducing infrastructure and costs, it’s infinitely scalable and will allow you to confidently grow your business and offer a world-class software service to your customers.
You can learn more about 10Duke Enterprise here, or you can watch the video below to learn the basics.
How Do Modern Licensing Solutions Work?
Let’s go back to our 10 licenses again – you just landed a great new customer who agrees to buy 10 licenses.
However, this time you’re using a 10Duke licensing solution, so now licensing is driven from the cloud.
You set up your new customer as an organisation within your dashboard and email the end users directly.
They create their own web-based account with your company and when they activate their account for the very first time, they’re automatically able to access the applications they have licensed from you based on an authenticated and active session. This even applies to desktop apps.
There are no license keys to generate or install. Your applications simply delegate all authentication and authorisation decisions to the 10Duke APIs and it enforces application access.
We call this the ‘Identity-based Licensing’ approach. It focuses on controlling a user's access to a product based on their authenticated identity, which gives you several benefits compared to legacy 3rd party solutions or self-built systems. Follow the link to learn more.
Why 10Duke Is the Go-to Licensing Solution
10Duke provides you with a cloud-based representation of this two-way linkage with your customers’ authoritative rights always sitting within your cloud view. You’ll always see the most up to date version of your customers access rights.
Any changes to the access rights of your customer can either be made manually through an admin panel in the cloud and this automatically propagates down to the end user in real-time, or you can enable your customer to do this in a self-serve manner with a few clicks within their account, meaning this process is essentially automated from your point of view as the software provider.
Similarly, when it’s time for access to be revoked, simply update the end-user’s entitlements through your dashboard and the next time they run the software they will have been downgraded to the new rights. Or, enable your customers to do this in a self-serve manner as well and automate your licensing process.
You can reliably rescind or upgrade prior access rights at any time and always ensure that the end-user is running with the correct entitlements. There’s no need for lengthy entitlement updates, giving you and your customers more operational efficiency and providing higher customer satisfaction.
True Flexibility and Control On Tap
With 10Duke you get true licensing flexibility and granular control – how, where, when and from what devices your applications can be accessed.
Your customers will love it because after the end-user has set up the initial connection, they simply use the software based on the rights that they’ve negotiated and agreed with you. As you enhance and extend usage rights this will be propagated automatically down to that end client.
Integrations with CRM systems like Salesforce are also straightforward to deliver, saving you and your team the hassle of having to keep CRM manually in sync with your licensing system.
If you’re a software vendor, it’s all about your customer’s experience. 10Duke Enterprise will help you deliver customer-centric licensing with a proven ability to drive more revenue than conventional licensing solutions.
We’ll help you remove licensing complexity from your end user environment and reduce support tickets, helping both you and your customers to deliver more.
Conclusion – What’s Next?
After understanding the importance of software licensing, the next step is choosing which software licensing model is right for you and your business.
The licensing model should be based upon what your business model is. There are two important goals to think about when choosing a licensing model. The first goal is to ensure profitability, whilst the second goal is to allow your customers to purchase licenses from you in a way they also find sensible.
Read our guide to learn about all the various software licensing models from common models such as floating licensing to more advanced models such as consumption-based licensing. All license models listed in the guide are supported by 10Duke.
Or, if you already know on what business terms you want to license your product, you can get in touch with us to schedule a no-obligation product demo to learn what 10Duke Enterprise can do for you.
To get more details on how 10Duke is different, you can also watch the video below or check our whitepapers or case studies.
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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?
