SaaS Management

  • 14 min read

3 Major Types of Software Licenses & Its Categories

Sethu Meenakshisundaram

30th November, 2023

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Entering the digital landscape means delving into the core framework that defines software integrity and user entitlements: software licensing. This vital structure protects developers' rights and sets the parameters for acceptable software utilization among users.

Let's take a closer look at what exactly software licenses are and the different types of software licenses that exist. Understanding these licenses helps us know what we're allowed to do with software and what advantages they come with. 

Software licensing serves as the backbone of the digital landscape, pivotal in preserving the rights of developers while guiding users on acceptable software use. For creators, licensing is more than legal protection; it's a gateway to revenue generation.

By outlining usage terms, developers establish monetization models, ensuring returns on investment for ongoing innovation and development. Additionally, licensing curbs unauthorized distribution, piracy, and infringement, preserving the software's integrity and the developer's income.

Understanding software licensing is equally vital for users. It clarifies acceptable software usage and sets expectations for support, updates, and features, providing users with a clear roadmap for engagement. By adhering to licensing agreements, both creators and users foster a fair digital environment that supports innovation, protects intellectual property, and enables sustained technological progress.

A robust grasp of software licensing ensures a balanced ecosystem where creators thrive through innovation and users navigate software use within ethical and legal boundaries.

What is a Software License?

A software license is a legally binding agreement dictating how software can be used and shared. It's essentially the rulebook that governs both the creators and users of the software, ensuring compliance with copyright laws and specifying usage rights.

This document outlines the precise permissions granted to users, ensuring they can utilize the software without breaching copyrights. Moreover, it sets out the responsibilities of everyone involved, establishing clear guidelines for the software's proper use.

Within a software license, you'll find terms and conditions covering various aspects, such as acceptable use, limitations of liability, warranties, and disclaimers. It's like a comprehensive roadmap, guiding users and developers on what they can and cannot do with the software.

Consider the General Public License (GPL) used for many open-source software projects like WordPress. It grants users the freedom to use, modify, and distribute the software while ensuring that any modifications made to the original software are also open source. This means that if you create a new version of GPL-licensed software, you must make your modifications available to others under the same license terms.

Why are Software Licenses Important?

Software licenses are crucial for several reasons.

• Legal Protection: Each type of software license outlines the terms and conditions under which the software can be used, defining the rights and responsibilities of both the software creator and the user. They protect the creator's intellectual property rights and prevent unauthorized use, distribution, or software modification.

• Warranty and Liability: Every software license type often contains disclaimers of warranties and limitations of liability. They clarify that the software is provided "as is" and that the developer is not responsible for any damages resulting from its use.

• Compliance and Accountability: By adhering to a software license, users and organizations ensure they comply with legal and ethical standards. It establishes accountability and helps avoid legal issues related to software's unauthorized use or distribution.

• Long-Term Cost Savings: While there's an initial cost associated with purchasing licenses, it often saves money in the long run by preventing the need to address legal consequences, recover from security breaches, or deal with software instability that could hinder productivity.

• Technical Support: Licensed software usually comes with customer support or technical assistance, reducing downtime and the time spent troubleshooting issues. This can significantly improve operational efficiency.

Software licenses broadly fall into three main categories, each with distinct characteristics and implications:

• Public Domain

• Open Source

• Proprietary

3 Major Types of Software Licenses

Here are 3 common types of software licensing models:

1. Public Domain License

One of the types of software license in the public domain represents the epitome of freedom in the software world. Here's a deeper dive into what a Public Domain software License entails:

When software falls into the public domain, it essentially means it's unencumbered by copyright restrictions. This status is achieved in several ways:

• Expired Copyright: Sometimes, software that was once protected by copyright eventually surpasses the duration of copyright protection, which varies by jurisdiction. Once this protection period ends, the software enters the public domain, becoming freely available for anyone to use, modify, and distribute without legal constraints.

• Ineligibility for Copyright Protection: Certain software might not qualify for copyright protection due to its nature. For instance, materials lacking originality or falling below the threshold of creativity prescribed by copyright law may not be eligible for protection. Consequently, these creations are considered part of the public domain from their inception.

• Intentional Dedication: A creator can intentionally release their work into the public domain by explicitly waiving all rights reserved under copyright law. This might involve using licenses like the Creative Commons Zero (CC0) license, effectively relinquishing all copyrights and allowing unrestricted use, modification, and distribution.

The absence of copyright constraints empowers users in unparalleled ways:

• Freedom to Modify: Users can modify the software's code without encountering the usual legal barriers, fostering innovation and adaptation.

• Unrestricted Distribution: There are no restrictions on sharing or distributing the software, allowing for widespread accessibility and utilization.

• Commercial Exploitation: Public domain software can be used for commercial purposes without the need for licensing agreements or royalties, enabling entrepreneurial endeavors without legal encumbrances.

The availability of software in the public domain acts as a catalyst for innovation and collaboration, offering a fertile ground for creative exploration and technological advancements without the usual limitations imposed by copyright laws.

2. Open Source Licenses

Open source license is another category of types of software license model that empowers users to access, edit, modify, and distribute an application's underlying source code without requiring explicit permission from the developer. However, they come with specific guidelines and limitations, contrary to the misconception that open source equates to unrestricted usage.

Despite the freedom to tinker with the code, open-source software licenses aren't a free-for-all. They hinge upon adherence to the terms outlined by the software's originator, who retains the copyright. Users are legally bound to comply with the stipulations outlined in the particular open-source license associated with the software.

Failing to adhere to these license terms can have severe consequences, potentially resulting in substantial financial penalties through legal disputes. Companies that overlook or violate these terms risk facing costly legal battles, potentially amounting to millions of dollars in damages.

Open source licenses span various types, each with its distinct legal requirements. Users and companies must comprehend the nuances of these licenses to ensure compliance. By understanding the specifics of each license, users can navigate the legal landscape effectively and harness the benefits of open source while respecting its governing terms.

Types of Open Source Licenses

1. Permissive Licenses

Permissive open-source licenses share similarities with public domain licenses but may entail additional constraints on altering or distributing the software post-purchase.

Permissive licensing offers a balance for software developers: it enables them to retain ownership of their intellectual property while exercising some control over the software's usage. This approach aligns with the open source ethos, often allowing the software to be shared freely.

Under a permissive license, users enjoy significant flexibility. They can utilize the software and even construct proprietary code atop it, converting it into closed-source software. However, a crucial condition persists: attribution to the original author or originator of the code is mandatory.

Typically, these licenses include a warranty disclaimer, absolving the originator from responsibility for changes made by subsequent users.

Several prominent permissive open-source licenses exemplify varying intents and enforcement mechanisms:

• Apache License 2.0: This license permits users to manipulate the software as they wish, provided they maintain proper notices on altered files. It incorporates a patent license granted by contributors, ensuring a perpetual, no-cost, irrevocable patent license. Attempting to litigate over patents linked to the software may result in the forfeiture of granted patent licenses.

• MIT License: Known for its brevity, the MIT license grants freedom to users to utilize the software or source code, requiring the inclusion of the original copyright and license notice in all copies. Variants like Expat are prevalent among JavaScript and Python developers.

• ISC License: Another succinct and permissive open source license, the ISC license permits broad usage with the condition of crediting the original author and including the initial copyright notice. Functionally akin to the MIT/Expat and simplified BSD licenses, the ISC license promotes open usage while upholding attribution to the creator.

2. Strong Copyleft aka Restrictive

Strong copyleft licenses, also known as restrictive licenses, are integral to the ethos of the "free software movement." They confer four fundamental freedoms upon end-users: the ability to access, inspect, modify, and distribute the source code of the software. However, this distribution is conditional, necessitating that any modified versions be shared under the same license as the original, ensuring the continuity of freedoms envisioned by the creator.

Unlike restricting commercial software development, copyleft licenses don't impede the creation of commercial software. Their aim, rather, is to prevent the emergence of proprietary software. Furthermore, while permissively licensed code can be integrated into copyleft projects, the reverse is not possible. Hence, for those aligned with the principles of the free software movement, a copyleft license is typically the preferred choice for licensing.

Among the notable strong copyleft licenses are:

• GNU General Public License v2.0 (GPL 2.0): This license grants permission for copying, distributing, and modifying software, contingent upon maintaining a detailed history of changes within the source files. 
  
  Additionally, any software containing GPL-licensed code compiled through a compiler must also be available under the GPL, accompanied by comprehensive build and installation instructions.

• GNU Affero General Public License (AGPL): Specifically designed for network applications, the AGPL deviates from other GNU licenses. It allows for the distribution of updated versions while requiring documentation of changes made and their respective dates. Similar to GNU licensing, derivative works must be licensed under the AGPL. 
  
  However, it incorporates an additional clause demanding source code distribution when publishing on the web. This provision makes AGPL suitable for websites and services (SaaS) because they are not conventionally distributed.

3. Weak Copyleft

Weak copyleft licenses balance open-source ideals and allow integration into proprietary software. They permit modifications and incorporation into proprietary products under certain conditions, ensuring the core open-source aspects remain accessible and sharable. Here are a few commonly used weak copyleft licenses:

• LGPL 3.0 (GNU Lesser General Public License v3): Initially designed for libraries, LGPL allows copying, distribution, and modification, provided that any changes are described and licensed freely under LGPL. While derivative works must adhere to LGPL, applications using the library aren't obligated to follow suit.

• Eclipse Public License 1.0 (EPL 1.0): Similar to GPL but permits linking code to proprietary applications under the Eclipse Foundation. It allows licensing binaries to be proprietary yet mandates accessible source code under EPL.

• 3-Clause BSD License: This license offers extensive freedom for software usage, requiring only the inclusion of the BSD copyright and license notice in distributed works.

• Mozilla Public License v2.0 (MPL 2.0): A straightforward license demanding source code availability for improvements under MPL. It allows combining MPL software with proprietary code if kept in separate files, enabling the distribution of proprietary binaries with accessible MPL source code.

• CDDL 1.0 (Common Development and Distribution License 1.0): Comparable to MPL and EPL, CDDL allows the distribution of binaries under a proprietary license while ensuring accessible original and updated CDDL source code.

These licenses foster flexibility in software usage by permitting integration into proprietary products while maintaining key aspects of open-source access and transparency.

3. Proprietary Licenses

Proprietary licenses are one of the types of software license that is a way for companies to safeguard their software as their intellectual property. Unlike open-source licenses that grant broader freedoms, proprietary licenses secure the ownership and control of the source code within the company that developed the software.

Through copyright protection, proprietary software owners limit users from duplicating, altering, or distributing the software. This control ensures the company retains exclusive rights over the software's code, features, and usage.

Users of proprietary software must adhere to an End-User License Agreement (EULA), a legally binding contract outlining the software's terms and conditions. Any modifications to these terms are typically prohibited.

In the realm of SaaS, EULAs commonly outline specific licensing terms such as:

• User-based charges, usually on a monthly or annual basis.

• Contract duration details.

• Conditions for termination of the software license agreement.

• Procedures for recovering charges if the software licensing agreement is prematurely terminated.

• Terms regarding white labeling allow licensees to rebrand and resell the product.

Ultimately, proprietary licenses afford companies comprehensive control and protection over their software, ensuring that usage adheres strictly to the outlined terms and conditions.

Now let's have a look at different types of software licenses that are most commonly used by companies:

Types of Proprietary Software Licenses

1. Perpetual Software License

A perpetual license grants users the right to utilize a software copy indefinitely after a one-time lump-sum payment. This model theoretically allows unlimited usage without recurring fees. However, in practice, there are nuances.

Purchasing a perpetual license entails ongoing responsibilities. Users may need to allocate resources for managing the software, which involves setting up servers, resolving errors or bugs, and more. While the initial license permits indefinite usage, the evolving landscape of technology and business demands regular updates and maintenance. As the software ages, annual support and upgrades become necessary, incurring additional costs to ensure compatibility and functionality with current standards.

2. Subscription-based Software License

The prevalence of subscription-based licensing has surged with the rise of SaaS solutions and cloud-based applications. This model revolves around customers paying a monthly fee for access to the software, offering a flexible approach to tailor the service according to individual needs.

The benefits of this software license model are manifold. It facilitates evenly-spaced payments throughout your usage period, making software access feasible for organizations with varying budgets. With nominal upfront costs, it becomes accessible to a wide spectrum of businesses. Moreover, software updates and maintenance are responsible for the vendor, freeing users to concentrate on their core operations.

Subscription licensing encompasses comprehensive support without extra charges. This inclusive approach covers maintenance, upgrades, and technical assistance within the subscription price, ensuring a seamless experience for users.

3. Named User Licensing

Named User Licensing is a software or platform access model that specifically allocates permission for a predetermined number of registered individuals to utilize it. Under this licensing structure limits access to a set group of designated users.

Each license in a named user model corresponds directly to an individual user, creating a one-to-one relationship between licenses and users. For instance, if a firm has obtained a named user license for three individuals, only those three registered users are authorized to utilize the software within that company.

One crucial aspect of named user licensing is its restriction against sharing access with individuals beyond the specified user pool. However, it typically allows license transfers between users within the designated allocation.

4. Concurrent User Licensing

Concurrent user licensing is a model where a vendor permits shared access to user licenses, enabling a group of users to utilize an application collectively. This license type establishes a maximum number of simultaneous application users allowed at any given time.

Each individual within the group can access the resource, but only up to the preset limit over a period of time. Consequently, it's typical for more users to register than the available concurrent licenses, necessitating a management strategy to ensure fair access and utilization of the permitted licenses.

5. Device Licensing

Certain software vendors opt to license their applications on a per-device basis rather than on a per-user basis. This approach grants permission to install and operate the software on a particular device, such as a laptop, computer, or data center component, tailored to suit the application's requirements.

In this form of software licensing, the user is granted authorization to install and run the software on a specific laptop, computer, or data center device — whichever device is most appropriate for the application's needs.

Device licensing proves to be a cost-effective solution in scenarios where multiple employees share a single computer for their work tasks. It ensures compliance and accessibility while accommodating various user needs within an organization.

6. Network/ Floating Licensing

Network or floating licensing is a distribution of software model that grants access to a particular software across multiple users and devices within a defined network infrastructure. This licensing method enables an unlimited number of users within the network to utilize the software, facilitating shared access and efficient utilization of resources.

One notable feature of this type of software licensing is its ability to support a concurrent licensing model. This distribution of software model regulates and limits the number of simultaneous users accessing the same application within the network at any given time. By implementing concurrent licensing, organizations can optimize resource allocation and ensure smooth operation by managing and controlling the number of active users having access to software simultaneously.

7. Consumption-based/ Metered licensing

Consumption-based or metered licensing is a flexible license type adopted by software vendors to charge users based on their actual usage of specific features, data, or tools within an application. Unlike traditional fixed licenses, this model aligns costs more closely with usage patterns, ensuring fairer pricing.

With this approach, users are typically billed monthly or quarterly, directly proportional to the amount of time they spend utilizing particular functions. This model offers scalability and cost-effectiveness, allowing businesses to optimize their expenses by paying only for what they actively use, making it particularly appealing for organizations with fluctuating usage needs.

Understanding these different types of software licenses is essential for effective software license management. Utilizing software license management tools becomes crucial in handling diverse software ecosystems. These tools automate processes, track license usage, ensure compliance, and optimize software utilization, simplifying what could otherwise be a complex and daunting task for organizations.

Platforms like Zluri offer a centralized solution to manage various licenses, ensuring efficient utilization while staying compliant with different software licensing agreements.

Unleash Next-Level SaaS License Management with Zluri

Zluri's SaaS management platform (SMP) offers unparalleled visibility into your organization's software assets and types of software licenses. Acting as a centralized control center, it is an indispensable tool for seamlessly overseeing and optimizing software resources. Within this platform, Zluri presents a robust array of features empowering users with comprehensive insight and precise control over their entire software ecosystem.

Gain Unparalleled SaaS Inventory Visibility

Zluri provides an unparalleled vantage point, offering effortless oversight of your entire software inventory. This platform excels in monitoring the diverse tools used across your company, delivering detailed insights into the software licenses associated with each application.

What sets Zluri apart is its adoption of five robust discovery methods, including single sign-on (SSO), integration with financial systems, API integrations, optional desktop agents, and browser extensions. This comprehensive approach leaves no license unaccounted for, providing adaptable solutions tailored to your organizational needs.

Zluri's adaptability streamlines oversight of your software ecosystem, significantly reducing the likelihood of overlooked or underutilized licenses and fostering a more efficient and secure software environment.

For example, imagine a multinational corporation utilizing various software tools across departments. Zluri seamlessly integrates with its existing systems, utilizing SSO to monitor usage patterns, API integrations for data retrieval, and optional desktop agents to cover all software instances. This comprehensive oversight prevents any unnoticed licenses, ensuring compliance and optimal resource allocation across the organization.

Efficiently Optimize Software Usage for Maximized Efficiency

Zluri's usage monitoring feature offers meticulous tracking, enabling precise identification of heavily used applications and those underutilized. These insights pave the way for data-driven decisions, optimizing your software resources and enhancing efficiency.

Its primary advantage lies in identifying areas ripe for cost savings. This functionality acts as a compass, guiding you to streamline your software portfolio by flagging underused licenses and redundant applications. Trimming the excess ensures every resource is optimized, maximizing your budget's efficiency.

Moreover, these usage insights empower proactive software asset management. They act as a guidebook, enabling your team to extract the maximum value from each software license, much like uncovering hidden treasures within your organization's software investments.

Enhance Organizational Compliance Through External Entity Management

Beyond internal operations, Zluri extends its software management capabilities to external entities like freelancers and partners. This functionality is crucial for comprehensive tracking and monitoring of software licenses used beyond internal boundaries, ensuring compliance in collaborative ventures.

This holistic oversight facilitates efficient management and optimization of software resources, ensuring adherence to licensing agreements and regulatory requirements in real-time. It tracks usage patterns and license types external entities utilize, strengthening the compliance framework.

Effortless License Renewal Reminders for Uninterrupted Operations

Zluri simplifies complex SaaS license renewal management tasks with its robust suite of features, prominently featuring the renewal calendar. This tool ensures proactive compliance with license renewal obligations, preventing disruptive lapsed licenses.

Imagine managing various types of software licenses, each with its unique renewal date. Zluri's renewal calendar steps in as a vigilant aide, offering tailored reminders that align precisely with your renewal schedules. You have the flexibility to customize alerts, receiving notifications well ahead of crucial contract renewals and payment deadlines. For example, if your organization relies on a software tool with a yearly renewal cycle:

• 30 days before the license expiration

• 15 days before the license expiration

• 1 day before the license expiration

Similarly, for tools with monthly payment schedules:

• 7 days before the payment due date

• 1 day before the payment due date

This adaptability ensures your preparedness, preventing any surprises. Let's consider a scenario where your design team heavily depends on Adobe Creative Cloud. Missing its renewal could disrupt ongoing projects. With Zluri's tailored reminders, you'd receive alerts well in advance, allowing a seamless license renewal and safeguarding your team's workflow.

Zluri's proactive renewal reminders empower your organization to manage licenses effectively, evading last-minute chaos and potential disruptions or compliance issues. This proactive approach streamlines operations, ensuring uninterrupted access to vital software tools.

Streamlined Automated License Lifecycle Management

Zluri's automated license lifecycle management navigates critical stages from requisition to deprovisioning, enhancing efficiency throughout. It swiftly provisions licenses for new hires, optimizing resources and ensuring swift onboarding.

One standout strength lies in Zluri's swift and precise license provisioning. Zluri ensures a seamless onboarding experience when new team members join by promptly allocating the required software licenses. This proactive approach minimizes delays, boosting employee productivity while optimizing license utilization.

For instance, imagine a newly hired team member needing access to essential tools. Zluri's automated system swiftly allocates their required software licenses upon onboarding, ensuring a smooth start without delays. This proactive approach avoids potential productivity hurdles.

Similarly, Zluri excels in license deprovisioning when employees leave your organization or no longer need specific licenses. The automation swiftly revokes unnecessary licenses, reducing waste and eliminating expenses tied to unused licenses, leading to substantial cost savings.

Consider an employee who transitions out of your organization. Zluri's automated deprovisioning promptly revokes their software access, preventing unnecessary payments for unused licenses. This efficiency safeguards your organization's budget while ensuring optimal license resource usage.

Moreover, Zluri conducts regular internal audits, automatically generating accurate reports on license statuses and usage. For instance, these reports reveal that a design software used by a specific team sees limited usage. 

Armed with this insight, your admins decide to optimize their license allocation, potentially reallocating those licenses to a higher-demand team or exploring alternative cost-effective solutions, ensuring optimized resource utilization and cost savings. These insights empower informed decisions about license continuation or alternatives, ensuring compliance and efficient resource allocation.

So what are you waiting for? Unleash the next-level SaaS license management with Zluri. now.

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About the author

Sethu Meenakshisundaram