When purchasing software you don’t actually buy the software, but a licence to use it under specific restrictions. Below is a list of licence types. Other types are covered here.
Proprietary software
Proprietary differs from open-source software in that the source code remains closed and remains in the ownership of the software creator. This software may be sold or given away under different licences such as enterprise, per-seat, or freeware.
Per-Seat Licensing (also known as Per-User Licensing)
- Definition: A licensing model where the cost is determined by the number of individual users who have access to the software. Each user requires their own license, often referred to as a “seat.”
- How it Works: If you need 10 employees to use the software, you purchase 10 licenses (or seats). If you add another employee who needs access, you must purchase an additional license.
- Key Characteristics:
- Direct Cost: Costs scale directly with the number of users.
- Clear Accountability: Easy to track who is licensed to use the software.
- Scalability: Simple to add or remove licenses in small increments.
- Best Suited For: Small to medium-sized businesses, teams with a clearly defined number of users, situations where tracking individual usage is important.
Enterprise Licensing
- Definition: A licensing agreement typically designed for large organisations (enterprises) that grants broad usage rights to a large number of users, often encompassing the entire organization or a significant division, usually for a fixed period (e.g., 1-3 years).
- How it Works: Instead of counting individual users, the license is often based on factors like the total number of employees in the company (or division), company revenue, number of devices, or sometimes a negotiated flat fee for unlimited use within the organisation.
- Key Characteristics:
- Broad Deployment: Allows for widespread use of the software across the organisation.
- Simplified Management (at scale): Eliminates the need to track and manage thousands of individual licenses.
- Predictable Costs (often high upfront): Usually involves a significant upfront payment or annual fee, but can be more cost-effective per user at very large scales compared to buying individual seats.
- Less Direct User Correlation: Cost is less directly tied to the exact number of active users at any given moment.
- Best Suited For: Large corporations, government agencies, educational institutions, organisations needing to deploy software to a vast or fluctuating number of users.
- Analogy: Buying an all-access pass or site license for an entire company campus or university. Everyone within that defined group gets access without needing individual tickets.
Enterprise: Pay a larger fee (often negotiated) for broad access for many (potentially all) users in a large organisation. Good for large-scale deployment and simplified administration at scale. Cost is less directly tied to individual user counts.
Per-Seat: Pay per individual user. Good for smaller companies. Cost scales with users.
End User Licence Agreement (EULA)
A EULA establishes a contract between an end user and the software company. It outlines the rights and responsibilities of the end user in how they use and don’t use the software. The EULA can also outline the limitations of the software in harming the end users system.