If you are utilizing any sort of apps or software at your business (you are), then you have most certainly entered into a license agreement with the person or business that created that software. These licensing agreements and the terms and conditions that you accept upon installation of an application can get wildly complicated, and take some time to fully grasp.
Fortunately, a bit of knowledge about software licensing in general, can keep you on the front foot and mitigate unnecessary risk involved with deploying an application out to your user base. It’s a lot of information to take in, which is why some companies outsource to businesses like Look Licensing, who can provide peace of mind and handle this somewhat dry subject matter.
What is Software Licensing?
Before we dive deeper into the various licensing models that are used by most software companies, let’s focus on answering the question of “what is software licensing?” A Software license is an agreement that sets the legal guidelines for the use and distribution of the corresponding software. It basically provides the license holder the right to use the software. The distinction should be made that the license holder does not own the software, they are simply allowed to use it, within the stated parameters. These parameters often include limitations, liabilities, disclaimers, warranties, and protection of the software. Software licenses are either free, proprietary, or open source. What distinguishes between each of these are how users may copy or redistribute the software for future use.
In a nutshell, the software license determines how often you can install the program, where and how you can install the program, if you are allowed to modify, copy, or re-distribute, and if you can look at the underlying source code.
Types of Software Licenses
Software Licenses can take a variety of forms and flavors. Having some familiarity with the different ways software publishers secure their property is the first step in ensuring you’re optimizing your software spend, and mitigating risk. We have put together the below list and included a summary of each to give you an idea of what’s out there. Feel free to browse around and let us know what you think.
Enterprise/Site/Unlimited License
An enterprise software license is often issued to a large company or corporation, which is quite similar to site-based licensing. It allows the license owner to install the program on several computers simultaneously. Often this means that as long as the actual physical site or enterprise itself is licensed, any number of deployments within that site or enterprise, is permitted. The benefit here is that you aren’t required to purchase the software separately each time you install it on another computer, which makes it convenient for large companies.
Server License
A server is a centralized computer software system that “serves” software (or services) to other users/devices. When software is distributed in this manner, the license tends to reflect it. The function of the server license is to control and dictate the use of that program throughout the organization. While some programs only require a license for the server, most server licenses have a corresponding Client Access License(CAL), that is required for each user/device that is interacting with the server.
Concurrent License
This type of license is based on the amount of simultaneous users that are accessing the software. It focuses on the instances of programs running on a server where users connect through the network. For example, if you have five concurrent licenses and five users that are using the software at the same time, then a sixth user would not be able to use the program. However, when one of the first five users logs out, the next person can then log in and use the software. The concurrent license basically offers wider access to the software but limits the number of simultaneous users that log into the program.
Device License
This license depends on the number of installations of the product. You can uninstall the software on one computer, and install it on the other within the same organization as long as the total number of installation does not exceed the amount of licenses purchased. A great example of taking advantage of this sort of license type would be in the case of shift workers that share machines. Each machine that has the application installed is licensed with a device based license. Then different employees/people/users can come and use that machine throughout the course of the day and still be within the confines of the licensing agreement. If that same application was being licensed via a user based license, every individual user would need to carry a license. The quick and dirty rule is to count your devices (don’t forget mobile devices) and count your users, and then use the license type that has less.
Trial/Evaluation License
The evaluation license is usually a marketing tactic, to push you toward a purchase. Typically It will allow the user access to the software a limited number of times, and may have some other restrictions. For example, if you use a specific type of PDF writing software, you may notice that the program will incorporate the name of the software and the trial version on the PDF document. Once the trial version is over, the users can make a decision to purchase a full license or completely uninstall the program. A good example would be Adobe Acrobat. You can enjoy all they have to offer with a free 7 day trial. You can find out more about all of Adobe’s legal terms here.
Node Locked License
This license permits access to the program on a specific number of computers. They are usually for server applications such as VMware products. The license can be transferred from one computer to another by requesting a new license key. The key is locked to a certain machine, granting you software license to one single computer. Because this type of license is uncounted, there can be an unlimited amount of simultaneous runs on one machine. This license is best suited for engineers or companies that develop projects on only a few workstations.
Perpetual License
Often referred to as “traditional” software licensing, perpetual licenses give you perpetual access to a specific version and edition of an application. Usually the purchaser pays an upfront charge for the software license and if subsequent versions of the software are released, an upgrade license would be required to update the program. You can find out more on perpetual licensing here.
Processor/CPU License
Processor, CPU, and Core licenses were introduced to the market when software vendors needed to adjust the commercial model for server based applications. While we already covered Server/CAL licenses, this license model doesn’t work for applications that have an unknown number of users. To solve this challenge, CPU licenses were introduced to then instead license the underlying horsepower of the server. To properly license a server in this way, you’ll need either a CPU license for each socket in the server, or a core license for each core in each processor in the server. It gets more complicated with virtual environments, but hopefully this gives you an idea of the concept, and why these licenses exist.
Rental / Subscription License
More popular all the time, subscription based licenses are sold and marketed more in the way of a service than a product. Generally a user will pay for a year or month access, and have unlimited access for as long as the subscription remains active. If you don’t like the program, you can stop paying for it, rather than having to pay a lump sum up front.
Token Based License
The token based license is a variance of a license model. Each time a particular program or title is running, it checks the license key from a server for the length of the operation. For example, if software X requires a license key from a license server whenever it runs, and if there is an availability, then the software is granted a license to run and operate. The software will eventually return the license to the server when it stops. Basically, the vendor will create a generic license key token instead of a license key that is connected with each product.
User Based License
User based licenses give access to the program to a certain number of users. Every time the user installs the software, it will be counted as an installation across various devices for that same user. This type of license is similar to device licenses in terms of simplicity: the number of users using the software, is the number of licenses that are required. If a company’s employees each have multiple devices that require the software, a user license is attractive, because one user license can cover several devices accessing the software.
OEM License
This license is delivered with the hardware and is only used for that specific hardware. The license is connected to the hardware and cannot be transferred to other devices.
FPP (Boxed) License
The industry term for boxed product is FPP, which stands for “Fully Packaged Product”. This is when you physically go to a store and buy some software off the shelf. In the case of an audit, these licenses are difficult to depend on. The auditor will require 3 points of proof, to show valid “Proof of License”. These points are: proof of possession, proof of authenticity, and proof of purchase.
Why is Software Licensing Important?
Software licensing can be a challenging topic, and for that reason, many businesses seek clarity and assurance from companies like Look Licensing. If companies choose to ignore this, it can lead to some painful issues. Computer programs can be very expensive, and software vendors have gone to great lengths to ensure that they are able to reliably generate revenue from the use of their software. There is no way around the licenses, except for refusing to install and use the software, so for the software your business uses, it is very important to understand the terms and conditions.
Using a Program That is Licensed Will Reduce Risks
Before deploying any software, it’s crucial to understand the legal ramifications around it. You are required to have a software license every time you install or use the program (even if that license is free, it is still required). Failure to understand and accommodate the licensing terms and conditions of the software you’re using is a very significant security and legal risk. We understand how overwhelming and confusing it can be to decipher all this. Put your detective hat on or outsource to others to find details about your software.
Understanding and Managing Your Licenses Can Save You Money
Using the wrong type of license can lead to wasted IT dollars very quickly. For example, if you use a CPU based license to license a server that has less than 50 users, you are likely spending thousands of dollars too much. Licensing that same server with 1 server license and 50 CALs will be much cheaper, if we assume all other factors are within the license parameters. It’s worth looking into, as the cost difference can be up into the six figure range.
Receive Support
Some software license companies have 24-7 tech-support, but majority are limited. They also tend to charge more money for the extra support. Something to keep in mind is that a software vendor will not provide support for an unlicensed install because a purchase is required.
You should make sure that you read the terms and policies early so you know the limitations around installing, and distributing the software package. A good understanding of the software license will save you money and lower your risks.
Final Thoughts
At the end of the day, whenever you utilize any software or program, it’s essential to understand what type of license comes along with it. Every software license has a specific purpose, and being well informed is essential to minimizing risk to the business.
Software companies are not stupid, and they have gone through great effort to ensure they are able to generate revenue. Our advice is not to try to “outsmart” these companies by finding gaps or loopholes in the licensing, but rather understand the way these licenses work, and then use that knowledge to optimize your licenses to your particular environment.
Hopefully this was at least a bit useful. If you have any questions or even anything to add, please reach out! Look Licensing is committed to being a valuable resource to you and your team!
Related: 5 Tips and Tricks When Getting Started With Software Asset Management
