Software Licensing First Steps
Linking software licensing with the prevention of software piracy misses the point. Software licensing is powerful technology that can be used to unleash revenue potential. The real reasons for software license management include:
- License Compliance. Pricing and Packing. Software licensing help ISV’s price and package their software products according to the market needs and customer requirements.
- Cost Savings. Manufacturers save money by minimizing software builds.
- Accurate Numbers. Aligning internal user costs to actual usage.
Software licensing is technology that software publishers use to help their customers automatically comply with their software products’ licensing terms. Increasingly, software users rely on their vendors to keep them compliant through electronic software licensing. At the same time, licensing helps vendors increase their revenues by giving their customers a reason to buy more licenses when they are needed.
A license manager, such as the Reprise License Manager™ (RLM), is an indispensable tool that can help you design and enforce pricing models that are right for today’s customers, while giving you the flexibility to quickly adapt to new opportunities as they emerge. When a license manager is properly integrated into your software, it is able to interpret and enforce virtually an unlimited number of licensing and pricing schemes.
In this article we attempt to provide a framework for how well-behaved applications use software licensing. Adherence to these guidelines will be greatly appreciated by your end-users who will see more consistent implementations. It is important to consider your end user and long-term support implications when designing your licensing implementation.
Decisions, Decisions… What’s a License Manager To Do?
Software users just want to get their work done. In a perfect world, software vendors don’t want to limit their users’ ability to access their software, but at the same time vendors want to be fairly compensated for that use. End-users generally don’t want to exceed their license rights (especially now with tighter internal compliance rules in place) but they often don’t know what those rights are, making it impossible to stay compliant.
Of course, publishers can decide how strictly to enforce their licenses by the way that their software behaves when licenses are not available. But, what strategy should these vendors adopt to strike the right balance between their needs and those of their customers? No single licensing implementation works across all product categories, but a license manager is the best tool to provide the flexibility to cover the full spectrum of license enforcement models – from “very strict” to “self-compliant.”
Licensing and business models change constantly in the software industry. To fully realize the benefits from implementing a license manager, careful consideration must be given to planning and implementation. There are several questions that should be asked when deciding which licensing models and strategies best match your product and market requirements.
What Should I License?
After you have decided how strict your licensing policy is going to be, you have to decide what to license. Most often applications are licensed as a whole – using a single license for the whole product, but in some cases, you may want to carve out additional separately-licensed features for which some customers will pay extra. Licensing should be aligned as closely as possible with how you plan to price and package your product.
Which Types of Licenses?
Determining the right licensing model requires an understanding of how your customers will use your products. If your products are dedicated to a specialized niche purpose, you can use a “named-user” or node-locked license. On the other hand, if the products are widely shared or used collaboratively, you will want to use floating or concurrent licenses.
Define Your User
Defining the term “user” may sound like a strange exercise, but the meaning of user may have a profound effect on your licensing. Getting it right means that your customers will use your software precisely as intended. Ask yourself these questions:
- Should the same user on the same machine consume only one license regardless of the number of copies he uses concurrently?
- Should a floating license used for only a short time return to the license pool immediately or should the license manager impose a delay to more accurately reflect the sharing of the license in the case of very short-duration applications, such as a compiler.
When the term “user” in your software license agreement matches your license enforcement mechanism you avoid any confusion with customers about the scope of your licenses.
Should Licenses Expire?
This basic question is at the root of your pricing model. Obviously, if you settle on using a subscription licensing scheme, you’ll want your licenses to reflect the paid license period, but even if you sell perpetual licenses, you may want to limit the duration of the license (start and end dates) so that licenses require periodic refreshment in the field and to address any future changes to the product licensing model.
Should Licenses Match a Specific Product Version?
Although version numbers in licenses can restrict which application version can run, most vendors prefer allowing older versions of software to consume newer licenses, but not the reverse. Some vendors creatively use license version numbers to manage support contract periods.
We have only scratched the surface here, but working with an experienced licensing vendor can help in address these any many other strategic decisions.