![Software License Management](https://images.prismic.io/licensespring/9a4eb021-6b70-4984-bfbe-d69350558de8_guide.png?ixlib=gatsbyFP&auto=compress%2Cformat&fit=max&w=1500&h=650)
Explore the advantages and implementation of cloud-based software license management in LicenseSpring's comprehensive guide. Optimize your license tracking and distribution.
Every organization dealing with technology must manage software across various aspects such as usage, procurement, and compliance. License compliance is crucial in managing software across these various aspects to ensure legal and efficient use. For software vendors, licensing and distribution are crucial for monetization strategies. LicenseSpring, a cloud-based tool, assists both software and hardware vendors in managing licenses efficiently. This article underscores the significance of software license management (SLM) across all organizational activities, including sales, customer support, and operations, emphasizing the necessity of a robust license management solution to streamline and secure software monetization processes.
Depending on the context and the vantage point, the meaning of software license management usually refers to 2 different things:
Software licensing management (SLM) refers to the processes of issuing, keeping track of, monitoring utilization, providing support for, and generally managing licenses that are distributed to end-users, resellers, or other parties.
Actual software license management could be as basic as a predefined list of keys that gets uploaded into an e-commerce platform, to a fully-fledged platform that can handle provisioning, dispatching (by email or other means), collecting analytics and usage, providing piracy detection, and that is fully integrated to other services. Licensing management software is often needed for most of these processes. A comprehensive software asset management tool can help manage software licenses, offer advanced automation, ensure maximum software investments, and integrate with existing IT infrastructure. Some of the primary activities involved in software license management for vendors include:
Software license management is the process of effectively managing and controlling the licenses and usage rights of software applications within an organization.
It involves software license tracking, monitoring, and optimizing license usage from their software inventory to ensure compliance with vendor agreements, legal requirements, and internal policies.
The primary goal of software license management is to manage software licenses, achieve cost optimization, license optimization, minimize legal and financial risks, and enhance overall software asset management efficiency.
This is accomplished by maintaining a comprehensive inventory of software licenses, monitoring software usage, and ensuring that the organization only uses authorized and properly licensed software.
From the perspective of software procurement or user software, the term software licensing management is a subset of software asset management (SAM). In this case, software licensing management refers to administrative overhead and compliance work including tracking installations, software usage, license renewals, and making sure that the organization does not violate licensing agreements. For software users, activities relating to Software License Management are usually a subset of SAM. For large companies, there are usually dedicated Software Asset Management Professionals, and a whole plethora of tools and services to optimize the utilization of software and ensure compliance with license agreements.
Entitlements represent the rights granted to a user or organization to access and use a software product. These rights may include the ability to install the software on multiple devices, receive updates and support, and access specific features or modules. Entitlements are often associated with purchase agreements or subscription plans.
Licenses, on the other hand, are legal agreements that govern the terms and conditions of software usage. They specify the scope of usage rights granted to the licensee (user) by the licensor (vendor). Licenses, through license agreements, define parameters such as the number of authorized users or installations, usage restrictions, renewal terms, and compliance requirements. While entitlements outline the user’s permissions, licenses enforce these permissions within a legal framework.
There are a few reasons why organizations should care about how they manage their licenses.
Vendors that are bad at software license management have high overhead bogging down their operations. Inversely, companies that are good at managing software licenses have many streamlined processes in place, reducing menial overhead on all, from product delivery, and customer support, to gaining insights through utilization, and improved revenue retention.
When procurement commits to software purchasing more expensive software licenses, or a higher volume of software licenses. In these circumstances, it is important to manage licenses well for several reasons:
The history of Software License Management is intertwined with how software was initially licensed, and decisions from that time still have ramifications present today.
At first, all software was technically free and unlicensed: In the early days of computing, software was often considered a by-product of the hardware, which in the 60s and 70s tended to only be used by governments, universities, and large corporations. The software was almost exclusively custom-built, for a singular task and purpose, and for a single customer, to be run on a single machine, there was no need to put much thought on licenses being granted at the time.
In 1969, a key event in the evolution of software licensing was when IBM, under pressure from antitrust investigations, decided to unbundle its software and hardware sales in 1969. This decision led to the recognition of software as a separate entity that could be sold independently of hardware. This moment in time is what many scholars believe was the birth of the software industry in its own right.
The mid to late 70s and early 80s also saw the introduction of personal computers. The gradual adoption of personal computers within homes and offices came with a sharp increase in demand for software.
As a result, the world began to think about software intellectual property protection, and software license agreements began to emerge as a contract between the software vendor and the software user. A whole new realm of concerns began emerging, with copy protection schemes to prevent unauthorized use, usage limits baked into the terms and conditions, EULAs (which stands for End User License Agreement) appearing in the 1980s, and auditing rights appearing in the 90s. Most Commercial software in the 90s was perpetual, or offered as a site license (it could only run on a specific closed network).
The wholesale adoption of the internet in the 90s brought many innovations, as software could be delivered without a physical copy, while license validation and usage verification could also be handled online. Cloud computing started to take off in the 2000s, when users did not even have to care about the hardware running the software to use it, provided they had an internet connection.
In the 1990s, digital rights management tools (DRM) began to emerge as a response to challenges posed by digital distribution and piracy.
The last 30 or so years also brought forth several landmark legal and regulatory developments clarifying the role of software licenses, and making distinctions between a sale and a license:
The emergence of app stores for mobile devices (the first being the app store by Apple, launched in 2008) has transformed the landscape further, centralizing software distribution and licensing, primarily for mobile devices developed by the maintainers of the app store (Such as Apple and Google with the Play Store).
The journey of software licensing from its nascent beginnings to today’s complex ecosystem reflects an ongoing adaptation to technological advances, legal challenges, and changing consumer expectations, with innovations in the fields of IoT, VR/Wearables, and large language learning models, each bringing in additional considerations for software license compliance, management of software licenses, and preventing the usage of unauthorized software.
Vendors will see many benefits to optimizing their software license management procedures primarily revolve around improved efficiency. Utilizing a software asset management tool, such as license manager by license dashboard, helps manage software licenses, offers advanced automation, ensures maximum software investments, and integrates seamlessly with existing IT infrastructure.
Depending on the volume of licenses being managed, automating certain tasks such as issuing licenses once an online order is processed, or giving the customer access to a portal that they can use to assign or unassign licenses can reduce work involved in provisioning, dispatching, monitoring, and license provisioning.
From our experience selling a popular PDF Editor, the user does not usually think much about their software license except at the moment of purchase or renewal, or if there is something wrong with their license. In general, software license management is one of the primary sources of support requests, regardless of software quality, about management of software licenses. Having a straightforward approach to provisioning, issuing, dispatching, modifying software entitlements, and license activation is key for customers to be satisfied with your software.
It’s well established that convenience is a significant factor in software piracy. People are more likely to pirate if acquiring and using digital goods legitimately is more difficult than using a torrent site. Having a streamlined process to easily bind licenses to devices, handle various edge cases, and implement license deactivation will reduce the incentive for legitimate users to seek pirated copies while simultaneously decreasing unauthorized use.
If you can easily provision different license types through your software license management tool (perpetual, trial, consumption-based, bundled, or turning on/off functionality), you’ll be able to quickly test and commercialize different business models. License customization allows for even greater flexibility in adapting to new business models. Although we believe that the quality of a software title is the primary contributor to the success of a software business, we also believe that the way a high-quality software title is productized (also known as software monetization) is key in determining the success or failure of a business. Failure to modernize software monetization strategies can, and has killed countless software companies.
Outdated license management software usually is difficult to integrate into your software title, often requiring writing a layer over their API. Similarly, middleware is often developed or implemented for integrations to CRMs, E-commerce, or support platforms. A modern software asset management tool like License Manager by License Dashboard provides native integrations with the most popular of these platforms, license synchronization, and a powerful API that takes the pain out of building necessary middleware.
A great software license manager can also be used to track software utilization. Knowing how a prospect used a trial license can lead to more productive follow-up conversations when the sales team is attempting to convert them to paid customers. The product development team would also find it informative to know what is the most widely used functionality of the product, while the support team would gain to know what component of an app is causing an uptick in support issues. Additionally, license analytics provide valuable insights into customer behavior, helping teams make data-driven decisions.
The main challenge we hear from established organizations that use outdated a software license management tool is inertia. Many companies know all of the many benefits their organization would have if they simply upgraded their license management software. Of course, it’s not so simple for several reasons:
One significant challenge is license migration, which involves transferring existing licenses to the new system without disrupting operations.
Importing licenses from one system to another, updating the interface between the licensed application and the new license manager, and then ensuring validation works often requiring several intermediate software updates is something no software vendor would do by choice, even if the new license management software is an order of magnitude better or cheaper. Additionally, the challenge of license import adds another layer of complexity to the process. No one was ever fired for going with the status quo, one of our customers once told us :)
Although we make it as seamless as possible, we acknowledge that given how deeply embedded the software licensing management tool like ours into the software being shipped, and all of the internal systems, it’s not a trivial undertaking, as it requires careful planning, handling of edge cases unique to any of the software vendors that work with us, and addressing license integration. Most of our current customers came to us when their status quo was no longer tenable (like when the contract renewal tripled the cost).
As mentioned above, no one gets fired at a company for choosing an incumbent provider, even if it leads to a poor outcome.
To get buy-in from internal power brokers, follow these steps:
There are a few key considerations when comparing software license management solutions. One important aspect is choosing the right software asset management tool. These tools, like license manager by license dashboard, help manage software licenses, offer advanced automation, ensure maximum software investments, and integrate with existing IT infrastructure. Another crucial step is license evaluation to ensure compliance and optimize usage. While every vendor might put different weight for different criteria, here are some of the more important attributes to look out for:
The license manager must not go down due to all of the upstream and downstream repercussions. Does the software license management solution publish credible uptime (or report their downtime)? Do they tell us where their servers are hosted and what their disaster recovery and business continuity plans are? Have these plans been tested? What is their bus factor? What is their license uptime? Depending on your organization, you might want to ask them whether they provide managed self-hosting or single tenancy options.
Business-critical data is stored within your software license management tools, which is why the provider’s security posture is of utmost importance. Some questions you can ask include: Does the software licensing management provider conduct regular penetration testing? do they have ISO 27001 certifications or obtained SOC2 compliance? What is their general security posture, and how open are they to sharing this information with you? Can you trust them with all of your customer data such as license usage? What measures do they have in place for license security?
Does the provider offer a trial account so that a thorough evaluation can be conducted? How difficult is it to get the software to interface with the software license management tools? How difficult is it to integrate the License Manager into other systems like the CRM, ERP, support tool, or recurring billing system? How complex is the license deployment process?
Remember, there will be many different people in your organization who will be interacting with the license manager, not just your developers. You might need to document how to issue and edit licenses for support staff, for example, and having an intuitive platform is very valuable. Additionally, consider the ease of use of the license management interface, as it directly impacts the efficiency of your operations.
A software asset management tool offers countless ways for licenses to be provisioned, delivered, validated, and tracked. Does the provider offer the feature set that is pertinent to your use case, including license features?
Traditional vendors will charge a percentage of licensed revenue. Others will charge per license issued. Others will charge based on the feature set and usage. Additionally, consider the license cost as it can significantly impact your budget. It’s important to understand the cost structure of the software license management system to determine if it fits within your business model.
A key aspect of serious vendors offering software licensing management tools is their willingness to collaborate with you. This includes providing support during implementation, accepting and implementing new feature requests, offering clear, easy-to-use documentation, and license support.
Here is a list of all of the known vendors we track, including 'license vendor'. We strive to make LicenseSpring the world’s best software license management system and recognize that part of the process of due diligence is comparing all available vendors.
An effective software license manager should encompass the following essential features of a software asset management tool:
In addition to LicenseSpring, several other software license management tools are available in the market, each offering unique features and capabilities. Some notable options include:
Flexera
10Duke
Nalpeiron
Reprise
Thales
Wibu-Systems
SLASCONE
License4J
netLicensing
Keyzy
Keygen
License Management Tools