Software license models

Software license models: What should companies look out for when choosing?

Software fulfills a wide variety of tasks in companies: It forms the technological foundation for various business models, helps to manage business processes, communicate with employees, customers and suppliers and much more. What many people only notice in passing: When private users or companies use software, this is always done within the framework of a license agreement between the developer of the software and the end user. There are many different software license models, which are characterized by different terms of use, support agreements, restrictions and costs, among other things. Commercial users in particular should have a comprehensive knowledge of software licenses, as they play an important role in adhering to legal regulations and compliance requirements within the company.

Definition: What is a software license?

A software license is the permission to use software with contractually regulated framework conditions. The underlying license agreement is between the company that developed and provided the software and the end user.

The license agreement is a text document that serves the purpose of protecting the intellectual property of the software developer and limiting claims against him that could arise from the use of the software. Among other things, it contains legally binding guidelines for the use and distribution of the software. The contents of a license agreement include, among other things

Permission to use the software
Rights of use
Number of users authorized to use the software
Services included in the scope of delivery of the software (e.g. support, maintenance, software upgrades)
Warranty conditions
Permissions and restrictions for the distribution of the software
Definition of copyright
Conditions for the termination of the license
Performance guarantees for the software
Contractual penalties and fees for non-compliance

Why is correct licensing important?

Software licensing is important insofar as it ensures that software is used legally. It also plays an important role in preventing IT security risks. Unlicensed software makes companies vulnerable and exposes them to potential threats and risks.

The use of unlicensed software is the equivalent of software piracy. The owner or copyright holder of the software can take legal action and assert high claims if a software audit reveals that the software used is not adequately licensed or is being used in a way other than agreed in the license agreement. Such audits are not only carried out at large corporations, but also increasingly at smaller companies in recent times.

Unlicensed software is also a potential security risk. Devices that use such software are more often the target of cyberattacks than devices with properly licensed software.

A user agreement or EULA (End User License Agreement) guarantees the legal use of software for end users. You also benefit from manufacturer support and regular security updates and do not run any risks in the event of a software audit.

What software license models are available?

The various software license models differ primarily with regard to the conditions for using, copying, modifying and passing on software. Most applications are either proprietary or to open source software, whereby specific software license models are used in each case. The two categories differ both in terms of their legal framework and the fact that proprietary licenses, unlike most open source licenses, are subject to a fee.

Software license models essentially relate either to

Proprietary software - also known as "closed source"

or on

Free and open source software (FOSS = Free and Open Source Software) - also referred to as "open source"

Proprietary software licenses

A proprietary software licensing model is based on the fact that software companies create the software and retain control over its code and thus its functions and use, which primarily serves the long-term monetization of the software by the developer.

Open source software licenses

Open source software license models grant the user the right to make changes to the source code of the software that is provided together with the software product.

In both cases, the software license usually stipulates limitations of liability for the use of the software product, mutual obligations such as support, as well as guarantees or warranty exclusions.

Another software category that plays a rather minor role, however, is public-domain software, which can be used without a license or legal framework.

Examples of software license models

"Proprietary" and "open source" are overarching categories for software license models. They each include a large number of different license models, which result in various advantages and disadvantages for manufacturers and users.

Permanent license

A perpetual license gives the user the unlimited right to use a software application after a one-time purchase. The license normally relates to a specific version of the software product.

In the past, the perpetual licensing model was very common, but this is increasingly changing. There are now other licensing models that enable software manufacturers to market their products more effectively.

Subscription-based license

A subscription-based license is a license that allows the end user to use software for a limited period of time on a recurring basis. Typical periods are 30 (monthly subscription) or 365 days (annual subscription) before the license must be renewed. As a rule, subscriptions are automatically renewed after the initial term.

The subscription-based license is one of the most common types of license. Most people are familiar with the basic principle from services such as Netflix or Spotify. It offers developers the advantage of generating ongoing income with their software, while users benefit from regular updates and good support.

Floating license

A floating license comprises a fixed number of licenses, which in turn entitles a corresponding number of users to use the software at the same time. The special thing about this is that a floating license can be transferred from one user to another as long as the number of available licenses is not exceeded - it therefore "flows" between different users.

For example, if a company with 30 employees has ten floating licenses, ten of these 30 employees can use the software at the same time. However, it does not always have to be the same ten. The advantage of floating licenses is that with a relatively small number of licenses, a theoretically unlimited number of users can use the software.

Copyleft license

Copyleft licenses are licenses for open source software that ensure that modified versions of the software continue to be available to users free of charge and open source. Anyone who modifies the code must publish their version accordingly with a copyleft license.

One of the best known and most widespread copyleft licenses is the GNU General Public License (GPL), which in various versions essentially ensures that end users can run software, view the source code, pass it on and modify it - and that the resulting new software must be distributed under the same license conditions.

Windows CAL

The Windows Server Client Access License (CAL) is a license that gives a user (User CAL) or device (Device CAL) the right to access services from a server running the Windows Server operating system. A user CAL must be purchased for each user who accesses the server to use services. Licensing software via CALs can be complicated due to the technical characteristics of servers and networks. A solution such as acmp license management helps to record access for both user and device CALs and thus provides the necessary transparency.

Node-locked license

Node-locked licensing is a software licensing model in which a license for a software application is assigned to a specific device.

Public domain license

Public domain licenses refer to free software that is not protected by copyright and does not require permission to use.

There are no restrictions on the use of public domain software - the code can be copied, modified and distributed without any consequences.

What is a license fee?

License fees or license costs are the costs for acquiring a license and thus the right to use software. The amount of these fees is part of the license agreement and usually relates to the costs for a single user or a certain number of users. Depending on the license model, the license costs are to be paid once or at certain intervals (monthly, annually). In particular, mixed forms of the above-mentioned license models entail different license fees. For example, a node-locked license in the form of a perpetual license incurs different costs than the same node-locked license in the form of a subscription. Furthermore, some perpetual licenses incur regular update fees for newer versions or security updates in addition to one-off acquisition costs, which in turn is similar to a subscription model.

As software license fees are associated with very high costs for companies, it is worth paying particular attention to this topic, as there is often massive savings potential .

Why do you need license management?

Software licenses are one of the biggest cost factors for companies when it comes to IT. What's more, once a company reaches a certain size, it is easy to lose track of the numerous software solutions in use. Questions quickly arise such as: Does the number of existing licenses match the number of licenses in use? Are we prepared for compliance checks and audits?

With the increasing complexity of IT ecosystems, software license management is becoming more and more important and reporting is becoming an essential component of software asset management. It is therefore important for companies not to take the issue of license management lightly and to look for appropriate strategies.

Solutions like acmp license management ensure that unlicensed software is detected in the company network before it becomes a problem. Insufficiently licensed applications can come to light during a software audit and result in high fines.

acmp License Management provides a transparent view of the software in use and identifies unused or unlicensed software, which can then be placed in a retirement or standby status. Efficient license management saves companies high long-term costs associated with unused licenses, compliance violations and cyberattacks.

Conclusion: clever management of software license models

Companies should be aware of what software license models are, which license models exist and what needs to be considered when using software in this context. With the help of a powerful license management solution, companies never lose track of their licenses. This minimizes the risk of legal problems and cyberattacks that can result from the use of unlicensed software.

Are you thinking about introducing a license management solution in order to save costs in the long term and be legally protected? Then let's talk - we will be happy to answer any questions you may have! Take Please contact us.

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