Choosing the Right Software Licensing Strategy

Choosing the right licensing scheme is critical to a software product’s success. Potential customers will not license your software if you choose the wrong licensing structure, even if your software is better compared to competing solutions. In addition, the right licensing strategy can pave the way for innovative and successful marketing strategies. As a result, one could argue that a software company’s success is determined by how it licenses its software.

Software licensing management

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Working toward higher-quality software license management is a must for most large or growing businesses. Working toward the target of implementing the best software and license management practices enables organizations to identify a complete software inventory as well as operate within established guidelines. This article will go over several best practices for software license tracking and management.

While improved software license management is definitely a goal that can be achieved, many businesses are unsure where to begin or which software license management process will provide the best results. In this article, we’ll go over the best practices for managing software licenses. These guidelines will provide managers with a starting point for the software resource management plan as well as an overview of the most effective methods.

Here is a good software licensing solutions provider to help you out.

What is software license management, and how does it work?

The tools and processes that a business undertakes to document and maintain its software licenses in order to ensure compliance with the developer’s software license are referred to as software license management.

Software license management provides visibility into your company’s software assets, licenses, usage, and contracts, allowing you to see what software is being used, how much it is being used, where it is being used, and by whom. By having total insight into your company’s software use, you can optimize your licensing, save expenses, and preserve your future software investment.

Software license management

Prevalent licensing

There are a number of well-known software licensing schemes. The majority of them are determined by the software’s architecture and target market. This chapter includes a summary description of the most common ones.

Perpetual license

A perpetual license is one in which a software application is purchased once and the licensee can use a copy of it indefinitely. The perpetual license is usually limited to a single version of the software. It often excludes future software updates, updates, and enhancements, however in certain cases, the “one-time perpetual license” charge may include them for one year.

Because it is one of the original license models, the perpetual licensing model has been very popular in the past. On the other hand, software companies are abandoning it in favor of more effective licensing structures that enable them to better commercialize their product.

Client-specific licenses

This is a common concept in client/server architectures. In most cases, you’ll need to purchase a license for each client (known as a Client Access License, or CAL for short), as well as a server license. This licensing scheme, for example, can be used with Microsoft SQL Server. An access license is required not only for each client connecting directly to the SQL Server but also for each client for whom data is stored.

License per installation/computer

This license entitles you to install and use the software on a single computer. If a person wants to use the software on more than one computer, they will need multiple licenses. Multiple users, on the other hand, are usually permitted to use the software as long as they do so on the same computer.

License by subscription

In a subscription license, the end-user purchases a recurring license for a set period of time. This could be for 30 days (monthly subscription) as well as 365 days (annual subscription). Subscriptions usually do not have a set end or termination date, and they dynamically renew after the first term.

The subscription license is one of the most prevalent license types. Because so many individuals have become used to them via popular streaming services like Netflix, one of their advantages is that they are easy for the buyer to comprehend when making a purchase choice.

Royalties on each sold item

This licensing scheme is just suitable for software products that are sold as a bundle or as key components of other software applications. For each end-user, the licensee must pay royalties to the license issuer. Take, for instance, the embedded market. Consider a robot with a microcontroller and a custom software application for the automotive industry. The vendor must pay a royalty to the actual software vendor when it manages to sell one of these robots.

As there are only a limited number of highly advanced and expensive items sold, it may make good sense to license software with royalties in these particular cases. This might not work as effectively for more generic software components.

No license fees at all

When dealing with open-source or freeware software, this is frequently the case. It is especially prevalent when selling assistance for a certain software application is significantly more profitable than selling the product itself. Free software apps can also be quite beneficial in terms of marketing.

Floating license

A floating license allows you to assign a set number of licenses to an application that can be shared across a group of individuals. For instance, you may give a company ten floating licenses, but that company may have 30 employees who may seek a license from the ten-license floating pool. No more access is authorized until all ten licenses have been checked out and returned to the pool. A floating license operates on a first-come, first-served basis and is an excellent solution for your customer to spread licenses among a group of people.

When tracking license consumption in a floating pool, customers waiting for licenses to become available presents a tremendous sales opportunity, as it demonstrates that there is a higher demand.

License for the site

A site license allows all users on the same site to use the same software product. A site might refer to everyone in the same building, at the same physical address, or in the same organization. This licensing scheme is frequently utilized to make licensing and license control easy for the purchasing party, rather than for prospective discounts, as many people believe.

Businessman using business software

Choosing an appropriate strategy

As previously said, software licensing is somewhat determined by its architecture. In a client/server architecture, for example, it seems normal to require a license for each client. However, there are other factors to consider:


How you license your software should be influenced by your intended market. Of course, your potential clients are more important than your competition. As a result, strive to devise a licensing arrangement that is equitable to both you and your customers. Always remember that the licensing scheme has a significant impact on buying choice. As previously stated, you can have the best software product on the earth, but if you have an improper license, potential buyers will either refuse or be unable to purchase your program.

Strategies for marketing

When developing a licensing system, it makes sense to consider possible marketing techniques. To build word-of-mouth marketing in the shrink-wrapped software business, it’s not uncommon to offer a feature-reduced version of your product or an edition without support for free. This is something you might want to think about for your own program.

Another marketing tactic to consider is for software programs that use a client/server architecture. Offering the server and perhaps one or two client licenses for free, depending on the target market, could be a fantastic marketing tactic. Small businesses that use your software for free are more likely to stick with it as they grow and purchase more client access licenses.

Parting words

I hope this article sufficiently describes the various licensing schemes and their benefits and drawbacks, emphasizing the importance of choosing your license approach. While not an exhaustive study, the points above should serve as a beginning point for licensing questions.


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