Is Proprietary Software the Right Choice for Your Business? An In-Depth Guide

What is Proprietary Software?

Also known as closed-source software, proprietary software is developed and distributed by companies that retain exclusive rights to the source code, which is often carefully guarded. Source software and proprietary software differ significantly in terms of availability and modifiability of the source code; open-source software (OSS) allows users to view, modify, and distribute the code, while proprietary software restricts these actions.

Rights granted to end users are usually restrictive: they typically cannot modify, share, or distribute the software without the owner’s permission. Proprietary software may be written for internal use within an organization or licensed to other entities. Custom license agreements dictate its usage, which may or may not include fees.

Examples of Proprietary Software

Proprietary software examples span a vast and diverse range of applications across different industries, highlighting the exclusivity and unique functionalities protected under copyright laws.

Here are some of the common categories of software from LicenseSpring’s customers, however the listed example products are not customers of LicenseSpring:

CAD/Engineering Software:

• AutoCAD: A computer-aided design (CAD) software used for creating precise 2D and 3D drawings and models.
• SolidWorks: A solid modeling CAD and CAE program that provides tools for designing mechanical parts and assemblies.

Productivity Software:

• Microsoft Office: A suite of applications including Word, Excel, and PowerPoint, used for word processing, data analysis, and presentations.
• Evernote: A note-taking app that allows users to organize their notes, tasks, and schedules in one place.

CRM Software:

• Salesforce: A cloud-based CRM platform that helps businesses manage customer relationships, sales, and marketing.
• HubSpot: An inbound marketing and sales software that provides tools for CRM, social media marketing, content management, and web analytics.

Project Management Software:

• Trello: A web-based project management application that uses boards, lists, and cards to organize tasks and projects.
• Asana: A project management tool that helps teams plan, track, and manage their work and projects efficiently.

Operating System Software:

• Windows 10: A widely-used operating system by Microsoft, offering a user-friendly interface and compatibility with a broad range of applications.
• Ubuntu: A Linux-based operating system known for its stability, security, and ease of use, suitable for both desktops and servers.

Database Management Systems:

• Oracle Database: A multi-model database management system designed for enterprise grid computing, providing efficient data management.
• MySQL: An open-source relational database management system used for a wide range of applications, from web development to data warehousing.

How is Proprietary Software Typically Licensed?

Proprietary software is typically distributed under various proprietary software licenses, which are legal mechanisms that grant users the rights to use proprietary software while retaining crucial rights with the copyright holder. These licenses include:

Perpetual Licenses:

• A one-time purchase for indefinite use.
• Often requires additional fees for updates and support after a certain period.
• Common in traditional software models where long-term use is desired without recurring payments.

Subscription Licenses:

• Involves recurring fees, typically monthly or annually.
• Includes access to updates, new features, and support as long as the subscription is active.
• Suitable for users who want continuous improvements and support.

User-Based Licenses:

• Fees are based on the number of users or devices accessing the software.
• Often used in enterprise environments where the software is deployed across multiple users or devices.
• Can be tailored to the specific size and needs of an organization.

Feature-Based Licenses:

• Different tiers with varying features and costs.
• Allows users to pay only for the features they need, making it a flexible option for different use cases.
• Common in SaaS (Software as a Service) models where premium features are available at higher price points.

Consumption-Based Licenses:

• Charges are based on actual usage of the software, such as the number of transactions, amount of data processed, or compute hours.
• Provides flexibility and can be cost-effective for businesses with varying usage patterns.
• Common in cloud services and platforms where resource usage can fluctuate.

Ensuring License Compliance of Proprietary Software

There are many tasks involved in ensuring proprietary software is used in a way that is compliant with the software vendor's license agreement, which typically falls under 3 main activities: License Management, App Security & anti-cracking, and countermeasures such as app crippling, piracy detection, and site audits.

License Management:

• License Keys: Unique codes required to activate the software.
• Online Activation: Verification of the license via an internet connection.
• Audits and Compliance Checks: Regular checks by the software provider to ensure compliance.

App Security & Anti-Cracking:

• Digital Rights Management (DRM): Technologies controlling the use and distribution of digital content.
• Anti-Piracy and Anti-Cracking Mechanisms: Measures designed to prevent unauthorized use and modification of software.

Countermeasures:

• App Crippling: Reducing functionality or disabling the software if non-compliance is detected.
• Piracy Detection: Identifying and monitoring unauthorized use.
• Legal Actions: Penalties and lawsuits for violations.

Restrictions on Modification and Distribution

Users cannot modify, share, or distribute proprietary software without permission. This control helps maintain software integrity and ensures consistent user experiences.

Benefits of Proprietary Software

Since LicenseSpring's service is predominantly provided as proprietary software (there are a few of our SDKs that are in fact open source software), it can serve as a good example for some of the benefits that the end users enjoy as a result of our license decisions.

Quality and Reliability

There is usually a budget and a professional team involved in the development and maintenance of proprietary software. Although this does not necessarily guarantee higher quality products with fewer defects, it is generally expected of commercial software to have a certain level of quality and reliability. Quality and reliability concerns can also be addressed contractually through a Service Level agreement with guaranteed response times, while the licensing fees should help to ensure a budget for fixing bugs and generally maintaining the health of a closed source software project.

At the time of this writing, LicenseSpring employs about 20 software engineers actively developing and maintaining, patching, and updating our existing code base, while adding ever more sophisticated functionality, as evidenced by our various changelogs. Reliability is largely handled by our dedicated operations team, which is currently maintaining a service uptime above 99.99%, as evidenced by our Status page.

Security

Controlled access to the source code can arguably decrease the risk of malicious attacks. Proprietary software enhances the performance, security, and user experience of various computer systems through optimized installed software, including personal computers, servers, and embedded devices. Regular security patches and updates are provided to address vulnerabilities promptly, maintaining robust security standards.

LicenseSpring’s R&D team is ISO 27001 and ISO 9001 certified, and follows NIST and OWASP best practices to help ensure our service is secure.

Customer Support

Proprietary software should include some form of customer service and technical support. Companies provide training and resources, such as detailed documentation, to help users maximize the software's potential. We have dedicated staff for answering support requests.

LicenseSpring employs several customer support agents to provide answers to implementation questions, best practices, log bugs, and relay feedback to the rest of our team.

Innovation

Investment in research and development leads to cutting-edge features tailored to specific industry needs. Proprietary software companies often develop unique solutions that address niche market requirements, providing significant competitive advantages.

*When software is proprietary, it typically comes with certain expectations. However, it's important to note that not all proprietary software will meet these standards. High-quality proprietary software often includes rigorous development, robust security measures, comprehensive customer support, and innovative features.

Challenges of Proprietary Software

Cost

Proprietary software almost always comes with a cost, with initial purchase prices and ongoing licensing fees. When businesses purchase proprietary software, they obtain a license that limits how the software can be used and distributed. Additional costs may arise for upgrades and additional features, impacting the overall budget.

Flexibility and Customization

Limited ability to modify or customize the software can be a drawback for businesses with unique requirements. Users depend on the vendor for feature updates and changes, which may not always align with their needs.

Vendor Lock-in

Switching to alternative solutions can be difficult due to vendor lock-in. The software vendor plays a crucial role in providing customizations, extensions, security, integrations, templates, and user/developer experience.

Long-term dependency on a single vendor may limit flexibility and increase risks associated with vendor stability. However, LicenseSpring mitigates this risk by allowing you to export license information and migrate to another vendor, ensuring you have the flexibility to adapt as your business evolves.

Compatibility and Interoperability

Integrating proprietary software with other systems can pose challenges due to proprietary formats and standards. Ensuring compatibility with existing infrastructure may require additional resources and planning.

Open-Source Software: A Different Approach

Open-source software is the opposite of proprietary software in many ways, granting users more permissive rights to use, modify, and distribute the source code. OSS is often free software, available for use at no monetary cost, but not all open-source software is necessarily free. OSS is usually free, with authors often monetizing through maintenance, support, or additional closed-source software. For instance, Android is an open-source operating system, but essential services like Google Play Services are closed-source.

Comparing Proprietary and Open-Source Software

Cost Considerations

While proprietary software often involves higher upfront and ongoing costs, open-source software can reduce expenses. The gap between commercial software and paid versions is narrowing, with commercial software achieving technological advancements nearly on par with paid versions. However, total cost of ownership should be considered, including support, maintenance, and potential customization costs.

Customization and Flexibility

Open-source software offers greater flexibility and customization options, allowing businesses to tailor solutions to their specific needs. Proprietary software provides out-of-the-box functionality but with limited customization.

Security and Support

Proprietary software typically offers robust security measures and dedicated support. The Windows operating system, a proprietary software, is known for its comprehensive support and frequent updates, while the Linux operating system, an open-source software, is praised for its flexibility and community-driven development. Open-source software relies on community-driven security practices, which can vary in reliability.

Community and Innovation

Open-source software benefits from community-driven development and rapid innovation. The proprietary software model provides exclusive features, enhances user experience, ensures quality control, and enables businesses to offer unique features and reliable customer support. Proprietary software, however, often features more polished and professionally developed innovations tailored to market demands.

Making an Informed Decision

Assessing Business Needs

When choosing between proprietary and open-source software, consider factors such as budget, customization needs, and support requirements. Assess the specific needs of your business to determine the most suitable option.

Evaluating Total Cost of Ownership

Conduct a detailed cost analysis, including initial purchase costs, licensing fees, support, and maintenance. This comprehensive evaluation helps in understanding the long-term financial implications.

Long-Term Considerations

Plan for future growth and technological advancements. Consider the scalability of the software and the vendor's ability to support evolving business needs.

Engaging with Vendors

Engage with potential vendors to understand their offerings, support services, and long-term viability. It is crucial to hire developers with expertise and experience in proprietary software development to build the solutions businesses need. Ask questions about their development roadmap, customer support, and compliance with industry standards.

Conclusion

Proprietary software typically offers numerous benefits, including high quality, robust security, and dedicated support. However, it also comes with potential challenges such as higher costs and limited flexibility.

Comparing proprietary and open-source software, considering business needs, and evaluating total cost of ownership are crucial steps in making an informed decision. Whether proprietary software is the right choice for your business depends on a thorough analysis of these factors, ensuring that the chosen solution aligns with your strategic objectives.