Software licensing governs how your business can use the software it buys or uses. Every piece of software has a licence agreement which explains what you can and can’t do with it.
You usually have to agree to the terms of a software licence either when you install the software, or the first time you use it.
Having the right licences ensures your business is using software legally. You can also save money by only buying the software licences you actually need.
Every piece of software – even free software - has some kind of software licence. They’re often lengthy and difficult to read, and usually cover these key points:
A licence agreement may also include information about upgrading or reselling the software (resale is usually prohibited), and any steps you must take to activate the software.
Make sure any licence agreement meets your needs, and that you understand the restrictions and cost implications before agreeing to it.
It’s important you match your software licensing to the needs of your business. This will ensure you have the right number of software licences. With too many, you’re wasting money – yet with too few, you leave yourself open to prosecution for using software illegally.
The right licence agreement can also make it easier to manage software in your business. For instance, some licences permit you to install software automatically across your computer network rather than needing to install it manually at each computer.
When dealing with standard software, there are three main types of software licence:
If you’re dealing with custom software which an IT supplier has developed for you, licensing may be handled differently. Your contract with the development company should specify what you own and how you can use the software.
In this situation, it’s wise to ensure you own the software and any underlying computer code outright. If you don’t, you’re likely to be reliant on that one supplier in future.
Businesses with fewer than five computers usually find it’s easiest to purchase single user licences for the software they need. However, some software publishers offer multi-user licences for a small number of users – if available, this is usually cheaper.
With more than five computers, volume licences are probably more effective. The cost per computer drops the more computers you have, and volume licences offer more options should you want to upgrade your software or allow more people to use it.
If you are using cloud computing services to access software, it is likely you pay on a subscription basis – usually per user per month. This option can offer greater flexibility, is cost effective as you only pay for what you need and is easily scalable.
As software licensing can be a confusing area, it's usually a good idea to seek advice. After all, you don't want to pay for software licences you don't actually need.