Everything You Ever Wanted to Know About Licensing-As-A-Service (Laas) Providers

A critical factor in distributing and managing software applications involves managing license entitlements according to the agreements the software vendors have with their customers, distributors, or users.

While maintaining your own cloud server or cloud services as a self-hosted solution can offer benefits and be the right strategic choice for many vendors, it also entails significant overhead. This includes maintaining a server, updating functionality as the vendor's needs evolve, and ensuring security and privacy requirements are met.

What might start as a simple project to spin up a cloud server network or a license server often can grow in scope, involving software developers, integrators and dev ops, and project managers, sucking valuable resources from building real value-add into the software applications (guess how we got started back in 2015!).

Let’s look at what software licensing as a service is, as well as some legitimate alternatives to using a third-party, cloud computing service to handle such an important aspect of software distribution.

Understanding Software Licensing as a Service (LaaS)

Understanding Software Licensing as a Service (LaaS) involves delving into its key components, including the vendor interface, client application interface, and portals for different user roles.

Let's explore each aspect:

Vendor Interface

• The vendor interface (usually called a platform or portal) is an account where the software vendor can log in and manage all of the entitlements for their desktop and mobile apps.
• Tasks that a software vendor would achieve in the vendor platform include specifying the apps to be distributed, defining and editing license policies, and issuing new or modifying existing licenses.
• Product managers, developers, customer support engineers, and account managers all would have reasons to interact with such a portal to fulfill their various roles.

Client Application Interface

• A method for software applications distributed by vendors to establish a connection with the license server.
• Operations performed by the applications include activating or validating licenses (the process of binding the license entitlements to a device) or checking and updating the license entitlements with the record against the server.
• This bridge between the client application and the license server is usually provided in the form of an Application Programming Interface (Licensing API), or possibly a Standard Development Kit (License SDK) for different programming languages compiled for different environments.

Portals for Different User Roles

• A licensing portal caters to diverse user roles, enabling tasks like license assignment, unassignment, and activation on offline devices.
• Given varying requirements for issuing, assigning, and using licenses, a reliable licensing-as-a-service provider delivers tailored solutions for these workflows.

What are the Pros and Cons of Using Licensing as a Service

Using Licensing as a Service (LaaS) offers various advantages and disadvantages compared to traditional licensing methods.

Here are the pros and cons:

Pros

Scalability

• LaaS providers offer scalable solutions that can accommodate both small businesses and large enterprises, adapting to changing needs.

Flexibility

• LaaS allows businesses to implement various licensing models and customize license rules based on specific requirements.

Reduced Infrastructure Costs

• By leveraging a third-party LaaS provider, businesses can avoid the costs and complexities of developing and maintaining an in-house licensing infrastructure.

Faster Time to Market

• Implementing LaaS can expedite software deployment and reduce the time required to bring products to market.

Improved Security

• LaaS providers often implement robust security measures, protecting against unauthorized access and piracy attempts.

Analytics and Reporting

• LaaS platforms usually include analytics and reporting tools, providing valuable insights into license usage and customer behavior.

Automatic Updates

• With LaaS, license management systems can be updated automatically, ensuring compliance with the latest industry standards and security protocols.

Cons

Dependency on Provider

• Relying on a third-party LaaS provider means that businesses are dependent on the provider's availability and reliability.

Data Privacy Concerns

• Sharing licensing data with an external provider may raise data privacy and compliance concerns, especially in regulated industries.

Internet Dependency

• LaaS systems often require internet connectivity, which may limit accessibility in certain environments or regions with unreliable internet access.

Service Outages

• Downtime or service disruptions from the LaaS provider could impact the availability and functionality of licensed applications.

Limited Customization

• Some LaaS providers may have limitations on customization options, which may not fully align with specific business needs.

Potential Costs

• While LaaS can reduce infrastructure costs, the subscription fees associated with using the service could be an ongoing expense for businesses.

Integration Challenges

• Integrating LaaS with existing systems and applications may require additional development efforts and testing.

What Are Alternatives to Licensing as a Service?

LaaS is a relatively new model for implementing software license management.

Here are some common alternatives to assist with selecting the correct license model for your software:

Traditional Perpetual Licensing

• In this model, customers purchase a perpetual license for the software, allowing them to use the software indefinitely.
• Perpetual software licensing often involves a one-time upfront payment.

Subscription Licensing

• With subscription licensing, customers pay a recurring fee for a specified period (e.g., monthly, annually) to access and use the software.
• The license remains active as long as the subscription is active.

Node-Locked Licensing

• Node-locked licensing ties the software license to a specific device (node).
• The software can only be used on the licensed device, regardless of user accounts.

Concurrent Licensing

• Concurrent licensing allows a specific number of users to access the software simultaneously.
• The license limit is based on the number of concurrent users rather than individual installations.

Hardware Dongle Licensing

• Hardware dongles are physical devices that users connect to their computers to enable software access.
• The dongle acts as a license key, ensuring software usage is limited to the devices with connected dongles.

Feature-Based Licensing

• Feature-based licensing allows customers to choose different levels of functionality or features within the software, paying for the specific features they need.

Freemium Model

• The freemium model offers a basic version of the software for free, with limited features.
• Users can upgrade to a premium version with additional features by paying for a license.

Open Source Licensing

• In open-source licensing, the software's source code is made available to the public, and users can access, modify, and distribute the software freely under certain licenses.

Pay-Per-Use Licensing

• Pay-per-use license models charge customers based on the actual usage of the software application.
• The fee may be based on metrics like the number of API calls, transactions processed, or data storage used.

Custom Licensing Solutions

• Some businesses may opt for custom licensing models tailored to their unique needs and customer base.

Enhancing Security with Software Licensing as a Service

Enhancing security is a critical aspect of Software Licensing as a Service (LaaS) implementations.

Here are several ways LaaS can bolster security:

1. License Validation and Verification: LaaS providers implement robust mechanisms to validate and verify software licenses. This ensures that only legitimate and authorized users can access the software, preventing unauthorized use and piracy.
2. Encryption and Secure Communication: LaaS platforms use encryption to secure communication between the software application and the licensing server. This safeguards license information and prevents eavesdropping and data interception.
3. Anti-Piracy Measures: LaaS providers incorporate anti-piracy measures, such as license revocation and IP blocking, to prevent unauthorized copying or distribution of licensed software.
4. User Authentication: LaaS solutions often include user authentication mechanisms, such as username/password or two-factor authentication, to ensure that only authorized users can manage licenses and access software features.
5. Software Updates and Patches: LaaS providers promptly release software updates and security patches to address vulnerabilities and protect against potential cyber threats.
6. Data Privacy Compliance: Reputable LaaS providers adhere to data privacy regulations like GDPR (General Data Protection Regulation) and implement data protection measures to safeguard customer information.
7. Activity Monitoring and Reporting: LaaS platforms offer activity monitoring and reporting features, allowing administrators to track license usage, detect suspicious activities, and identify potential security breaches.
8. Secure Cloud Infrastructure: LaaS providers often deploy their solutions on secure cloud infrastructures, benefiting from the security features and certifications offered by leading cloud service providers.
9. Disaster Recovery and Redundancy: LaaS providers implement disaster recovery measures and data redundancy to ensure business continuity and protect against data loss in case of system failures.
10. Auditing and Compliance: LaaS platforms may offer auditing capabilities, enabling organizations to monitor and track license usage for compliance with licensing agreements and regulations.
11. Third-Party Security Assessments: Some LaaS providers undergo third-party security assessments and certifications to validate the robustness of their security practices and controls.
12. Customer Education: LaaS providers may offer educational resources and best practices to help customers optimize security settings and practices when using the licensing solution.

Key Considerations for Migrating to Software Licensing as a Service

We think there are a few key considerations for independent software vendors to make when shortlisting a LaaS provider to create a PoC:

1. Business Objectives: Clearly define your business objectives and how LaaS aligns with them. Identify the specific benefits you aim to achieve, such as scalability, cost savings, or enhanced security.
2. Licensing Model: Choose the most appropriate licensing model for your software and customer base. Consider factors like subscription-based, node-locked, or feature-based licensing options.
3. Customer Impact: Evaluate how the migration will affect your existing customers. Communicate the changes clearly and address any concerns to ensure a smooth transition.
4. Data Privacy and Compliance: Ensure that the LaaS provider complies with data privacy regulations and offers robust security measures to safeguard customer data.
5. Integration and Customization: Assess how well the LaaS solution integrates with your existing systems and applications. Determine the level of customization possible to meet your unique requirements.
6. Cost Analysis: Conduct a comprehensive cost analysis to compare the expenses of LaaS with your current licensing model. Consider upfront costs, ongoing fees, and potential savings.
7. Service Level Agreements (SLAs): Define SLAs with the LaaS provider, including uptime guarantees, support response times, and resolution procedures in case of issues.
8. Vendor Reputation and Reliability: Research the reputation and track record of potential LaaS providers. Choose a reliable vendor with a proven history of service excellence.
9. Migration Strategy: Develop a well-structured migration plan, including timelines, testing procedures, and fallback options in case of unexpected challenges.
10. Customer Support and Training: Ensure that your team and customers receive adequate support and training to adapt to the new licensing model effectively.
11. Contract Terms and Exit Strategy: Review the contract terms thoroughly, including termination clauses and data ownership. Plan for an exit strategy if needed.
12. Feedback and Continuous Improvement: Gather feedback from customers and internal stakeholders during and after the migration. Use this feedback to make continuous improvements to the LaaS implementation.

Does LicenseSpring offer Licensing as a Service?

Although LicenseSpring is used as a self-hosted solution by some clients, it was designed from the ground up to be a LaaS.

LicenseSpring is a relatively new vendor in the LaaS space, as it has been developed for in-house projects since 2015 and commercialized to a greater audience since 2017.

We pride ourselves on our modern licensing solutions, our “self-serve” approach of providing extensive documentation and code samples, as well as pricing as a utility (per API calls) rather than as a percentage of revenue.

We are GDPR-Compliant and offer SLAs for enterprise customers.