The Evolution of Software Licensing

Traditionally, software licensing strategies have been dominated by the concepts of fear and piracy to embed complex licensing and/or cumbersome licensing schemes into perpetually licensed software products. This tactic has proven to be highly profitable for market leaders in this space such as Macrovision and generated strong industry wide competition and innovation from competing companies such as SafeNet, Reprise, and Agilis.

The problem with a perpetually licensed approach is that the bells and whistles embedded into these schemes are often misused by customers and create customer dissatisfaction and resentment. Complex licensing schemes are difficult to implement, hard to maintain, and difficult for customers to use. Additionally, these schemes often prevent honest customers from purchasing additional seats because it is difficult to monitor usage. Finally, companies who make use of all available licensing features often find they have created a product management nightmare.

Honest customers want to remain honest and comply with the terms of licensing agreements. Software companies want to protect revenue streams by ensuring compliance and preventing piracy, as well as expanding usage. Meeting all of these demands in the perpetual licensing model is difficult at best.

The SaaS model solves this problem by being inherently tied to the concepts of subscription and usage. The majority of SaaS applications today make use of basic username/password authentication schemes to grant access to all or some of a SaaS based application. This model is much more eloquent than having to request or reset perpetually based licensing features. In this model, the burden of license management is removed from the customer and passed onto the product management function of the SaaS provider. Successful SaaS applications build restricted access relationships into the offering and tie roles and rights to an authenticated user. Thus, when companies want to add users or subscriptions there is typically a self-service module to facilitate such requests and existing agreements or credit cards are charged appropriately without modification.

For SaaS companies that have considered the product management aspects of subscription or metered consumption before deploying their SaaS application, this is a wonderful model for facilitating additional usage and/or subscribers. For those companies that have not thought through subscription access, there is a strong market need for the development of a SaaS based subscription management service that assists SaaS companies in managing and developing subscriptions within their SaaS applications.

Nevertheless, the SaaS based licensing model provides an eloquent evolution for license management.