A software licensing solution is a solution that allows companies that write, publish and sell software applications to easily issue, manage and revoke the licenses that they provide to their customers.
The term can be sometimes confused with a software license management solution which sometimes refers to a tool used by a licensee of different software applications to keep track of the software licenses they have purchased from different software vendors, for audit purposes. Learn more about license management here.
The industry has done a poor job at distinguishing clearly between the two types of solutions – when thinking about it, it is easiest to think about it from either the perspective of the software vendor selling an application or the customer buying the application.
The aim of this article is to define what software licensing solutions are and what they should be able to do in the 2020s. 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 allows an independent software vendor (ISV) to license the application it has created to a customer on specific business terms and 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 access to a web based application for one person, the software licensing solution is used by the vendor to ensure that only this person can access the application for that specific period of time. It then ensures that after the 30 days finish, access to the application is no longer granted.
- A similar, but more complex scenario might be a customer that has licensed 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 the case irrespective of application type and can be used for desktop applications, web applications, mobile applications, virtual machines and even APIs.
How you license your software is critical and you need to get it right, for both you and your customers. For you as the ISV or 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.
Your customers need to ensure that they’re using your software 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.
Traditional software licensing solutions that rely on software license keys or 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.