The Naked Truth about Software Licensing

What’s the real purpose of software license management?

Too often folks equate Software Licensing with the prevention of software piracy.  That notion really misses the point. People are often surprised to find out the real reasons for software license management.  Such as:


  • Marketing/Sales Promotions
  • License Compliance
  • Targeted Pricing Models
  • Manufacturing Savings – minimize software “builds”
  • Aligning internal user costs to actual usage



Software Licensing Basics
In a nutshell, 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.

Licensing works by describing licensing terms into digitally signed keys. These unique keys are issued to each customer in a text file to enable only the software that was ordered. When a customer runs a licensed application, it requests a license to run via a call to the licensing software. If a valid license key is found and it contains all the right attributes needed to grant the license, then the product runs as normal. If a license cannot be found or is not available (due to all licenses in use, unsupported version, expired licenses, etc.), then the program can take the appropriate action to gracefully exit, or continue running based on the vendor’s policy.

Increase Product Pricing Depth to Maximize Revenue
Licensing software gives vendors many tactical choices, allowing them to match the optimal policy to each type of customer based on the customer’s usage profile. For example, a vendor might sell a dedicated personal-use license to a particularly heavy user of a product. This license might be Area under the curveless expensive than a license that could be shared by many users. These shared licenses are sometimes called “floating,” “concurrent,” or “network” licenses. Using a license manager to fine-tune policies that correspond to various usage profiles helps vendors increase pricing depth  – avoiding the “one-price-fits-all” model or the highly sub-optimal “site-license.”

Discourage Unlicensed Use
Since license keys are usually “locked” to a computer’s ID, vendors also benefit by decreasing revenue leakage that might be caused by users who inadvertently use more software than they are licensed for. Licensed software can run only on machines for which it is authorized.

Enable Software Evaluation Programs
Software that is electronically licensed can also enable demos, trials, and evaluations. Since license keys may have expiration dates, vendors can offer their fully-functional products to their prospective customers for a limited time period, using the expiration date as an “impending event” to help close the sale. Software vendors can also offer customers an early look at a new release or complimentary products to help boost sales to their existing base.

Decrease Software Manufacturing and Distribution Costs
Software that is enabled with a license manager also helps vendors lower their manufacturing and distribution costs because a single binary copy of an application (replacing multiple SKUs) can enforce many licensing policies by simply issuing different license keys for each class of user. What’s more, an application that is secured by its software license key can be safely downloaded over the internet resulting in further savings and customer satisfaction. Using RLM’s Internet Activation will lower the costs of servicing your customers and will improve customer satisfaction by providing 24×7 access to license activation via a simpler installation process.

Benefits to End Users
Aside from the obvious self-compliance aspects mentioned earlier, licensed software also lets users allocate, control, and analyze their software usage. Users can reserve licenses for special users, groups or projects. They can also enter themselves into a prioritized queue when all licenses are in use. Users with the highest priority are served first. Since a license manager records all licensing transactions in a log file, end-users can easily create useful reports to help them build a case to buy additional licenses or to optimize deployment of their existing software inventory.

Please contact us if you wish to discuss these issues further.

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