Software Licensing Part 1: It's a License, You Don't Own Anything

As far back as I can remember, in nearly every conversation discussing software licensing, there is a belief by customers that they own a product. People often say "We own 25 licenses, seats, copies, sals, cals, etc.. ". Not so fast....In most every case you don't own anything, you have the rights to use the licenses. This series will be focused on the business side of licensing, and specifically the business application stack. I'll detail popular license models, how they work, some pros/cons, and changes that could benefit everyone seeking to deliver or receive the Same or Higher Quality (SOHQ) at the Same or Lower Cost (SOLC), the premise of IT.

The commercial software business is one of those unique industries that has created a product that you pay to to use but typically don't actually own. This always seems to surprise people, but the easy way to prove it is try to sell your licenses when you don't need them anymore or decide you don't like the product. On rare occasions I've seen exceptions, but mostly likely the end user license agreement (EULA) will put a stop to that under a paragraph about "non transferable".

I like the software business, and have many friends that make a living working in it, including myself to some degree. However, being a service guy that is always trying to understand how to help customers achieve SOHQ/SOLC, I've never understood why I (or anyone else) should pay for the majority of something up front that has a return on investment (ROI) over 3 to 5 years. Additionally, I can't resell/transfer it for whatever reason I decide, which eliminates my ability to recoup any part of a bad decision. I'm not positive how this evolved, but it's commercially pretty ingenious when you think about it.

Like anything else...over time customers get smarter, vendors react, and the market evolves. So new license models have evolved to enhance the ROI or ease the up front commercial side of the typical equation. Some of these models eliminate the need to care about any rights of transfer and some of them are combinations of software and service that can cause you pain for years to come if you are not informed. Then there is a spectrum in the middle.

In the next post I'll get into the license models.