How to Choose the Right Software Licensing Model for Your Business

How to Choose the Right Software Licensing Model for Your Business

In the age of digital transformation, there is an urgent need for organizations to optimise their digital and software assets to become as efficient as possible, and maximize business performance. This also directly leads software developers and vendors to not only develop and provide top-quality software, but implementing a licensing that is effective, provides options, and is a key part of the monetization strategy.

Hence, it is important to make the right choice of software licensing–be it large organizations, small and medium scale enterprises (SMEs), or emerging startups. The choice needs to be made by considering the type of software, the needs of the end users, and how it best suits the business.

Let us explore the prominent industry Licensing Models in details below.

  • Proprietary/ Commercial Licensing Model

    The most prominent types of software licensing models. Proprietary software licensing defines the legality, ownership, and ethics of its usage in its own way. The limits are imposed by those who implement the license–be it developer, publisher, or vendor. And by imposing them, the software officially becomes the property of the owner, and subject to their conditions. Consumers may be allowed to purchase the software, but is restricted and not allowed to share, distribute, modify under the licensed terms. It is referred to as ‘closed source’ software and may also be referred to as closed-source or ‘commercial software’. The user does not have access to the source code.

  • Non-commercial/ Open-source Model

    The ‘open-source’ model makes the source code freely available to the end users–making it easier for anyone to contribute to, modify, or use the software without seeking any special permission or purchasing it outright–even for commercial usage (under certain conditions)–with no cost whatsoever. However, it does protect the original creator through a credit-based system and prevents others from stealing their work, or taking credit for it.

  • Perpetual Licensing

    This is the most popular and commonly used traditional software licensing model. It involves the permanent purchase of the software by the customer/organization; forever for their keep and usage. Typically, an upfront pay is required for the license, and can sometimes be followed up by a yearly maintenance fee. While this has become outdated due to the increased flexibility of work-life; organizations can still fit it inside their budget if they know their exact needs and requirements.

Models that focus on user choice and flexibility

  • On-premise Licensing

    In this the software and license are installed locally on the individual’s machine. This is popular where the network is not connected to the internet and everything is being managed locally. Also known as ‘on-prem’, in this typically user’s machine information is collected and a license is issued against it manually. In the age of CD-ROMs, floppy disks, and physical media–this was one of the most prominent methods of software licensing. That is before internet and Cloud-based licensing took over.

  • Cloud-based Licensing

    In the 21st century, most software is run, tracked, managed, and maintained mostly online and this makes it convenient for both organizations overall, and individual users. It also provides an easy route for providers themselves to offer new updates and features regularly. Developers also benefit, since they manage to obtain real-time data on how customers use their software. It also offers flexibility and convenience to the makers of the models themselves, since necessary details of license agreements and protocols can be modified online, without visiting the premise itself.

  • Hybrid Licensing

    Hybrid licensing models offer a mix of both on-premise and cloud-based licensing models. It is often used as a stopgap by startups, organizations, and software vendors who are transitioning between on-premise and cloud setups. Providing an easy, efficient way of successful integration.

Choose the best for your organization

Software licensing, like the software itself, requires the right decisions to support it by organizational decision-makers and leaders. At Bastion Infotech, we believe it is important to first completely know and understand what your business requirements, before you make the choice–and are always open to sharing our thoughts and ideas.