Software License Management (sometimes called Electronic Software Licensing) allows an ISV or embedded hardware developer to control the usage of their products by their customers. The developer provides an electronic license grant to their customer which the license manager software interprets to allow the software to be used only within the constraints of the license grant. When a developer uses a license manager in this way, they are said to be using Electronic Software Licensing.

Typically, a license manager enforces a simultaneous usage limit on the software which has been licensed. This type of license is called a concurrent license, or a floating license. However, a license manager can do much more. Enterprise-class software license management systems also provide a number of licensing options such as node-locked licenses, named-user licenses, licenses which can be shared by the same user or computer, fixed-expiration demo licenses, automatically-installable demo licenses etc, in addition to the more typical floating licenses.

The software protection afforded by a license manager is often confused with copy protection. While all license managers include copy protection, a license manager also allows the end customer to verify that their usage of the software is within the limits of the license agreement with their software publisher, whereas software copy protection systems typically limit the execution of the software to a single computer. In addition, the license management software allows the end-user to generate reports of who is using which software licenses and at what time(s). This capability is often provided as a separate report writer which is specific to a particular license manager. So, while copy protection is a benefit only to the ISV, software license management provides benefits to both the ISV as well as the end-users.

Many software licensing systems also provide software activation (or license activation), i.e. the ability for an end-customer to retrieve their license over the internet without any human intervention.

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