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Software License Basics

Understanding software licensing is the basis of making an informed decision in purchasing software. There are many components to licenses that can be confusing and knowing which one is right for you will make your purchases all the more sound.

Here I hope to provide some basic information about typical software licenses that are encountered and where they fit optimally. It should help clarify license terminology and ease communicating requests to and between IT staff.

Single-seat (or per-seat): This means that for every computer you are going to have this software installed upon, you need 1 license per computer. If you are running the software on a terminal server (the software is only installed on one computer but multiple people will be accessing it remotely), you may need to buy a license per-user. Always look into this information or ask the company about these details if it will be used in a non-traditional manner like on a terminal server.

If you install a program on Computer A, it requires a license. We’ll call that License 1.
If you want to install the same program on Computer B, it too will require a license. We’ll call that License 2.
If Computer A no longer uses the program, you may uninstall the program from Computer A and install it on Computer B, in that order, using License 1 and not needing to purchase License 2.
It is piracy to have the program installed on Computer A and Computer B using only License 1, a single-seat license. It is usually more hassle and time consuming than it is worth to keep uninstalling and reinstalling the program where it is needed to remain in compliance. If this is more along your needs, look into a concurrent license.

Of course, this example is from a general understanding of software licenses and like all things from this guide, should be confirmed with the actual language of each individual license terms of use and End-User License Agreement for each software package. There are frequently exceptions to this general rule that states a license grants an installation on an employee’s work computer, singular, and an employee’s home computer, singular, (see Microsoft Select Licensing) or an exception that the software may be installed on an employee’s work desktop and their laptop.

Concurrency: Concurrent licenses can be explained simply as shared licenses based on use. If you have four people that will be using an application but it will be at different times, a concurrent license will probably save you money in this situation where each computer does not need a designated, separate license.

You can think of concurrent licenses this way: If you have four people using an application 25% of the time, one concurrent license should cover it.

As for what is a good ratio of installed instances to concurrent licenses, that is determined completely by the lawyers who show up to investigate and enforce your compliance. We try to stay in a healthy 3:1 or 4:1 ratio and push the envelope at 5:1 when a license is for an application that is used very rarely.

Site License: A site license is typically very expensive or at least more expensive than single-seat and concurrent licenses. The trade-off is that it is very easy to manage. A site license costs a good deal of money but it also grants you the ability to install this software on all computers in your organization. The end result is that the site license is actually cheaper per-computer than it would be to buy a single-seat or a concurrent license for the same number of computers that the site license covers.

A site license works typically by you telling the software company how many computers are in your organization and they whip up a price in response to that. You pay the cost and you can install the software on all the computers you just reported. Site licenses are rare, however, because there usually isn’t a great quantity of software that you want to install on all or most computers, an antivirus program would be one example though.

Microsoft Select: – Microsoft Select, or Select Plus since October 08, is a variant on licensing that Microsoft offers to Government institutions and educational organizations. Select licensing offers tons of features and conveniences for locations that qualify, which you can read about by visiting their site. One such feature is the ability to use Work at Home Rights to install the software on one work computer and one computer at home so that an employee might work on business-related materials at home.

Media: If, when purchasing software, you are presented with an additional optional cost for ‘media,’ you should know what it is. Media is referring to the physical installation media like a CD or DVD. You have to acquire the installation media at some point, so unless the distributor allows you to download the setup package you will need to buy the media at least once. If you already have the media from a previous purchase of the same version, there is no need to purchase it again unless you want to give the disk to another user. Media typically only costs a few dollars to cover the CD/DVD copy cost and shipping.

License key (or serial): A license key is typically a unique number and/or letter combination that a company will give you that authenticates that you legitimately purchased the license to a software package. License keys are a rudimentary version of piracy prevention because the person illegally using the software has to find the installation media and a license key now. Overall, it is just a bigger headache for all involved. Microsoft has volume license keys which allows you to use the same key for multiple installations, which is certainly a convenience.

Upgrades: Upgrades to software come in two varieties: major versions and minor versions. Major versions typically cost money to upgrade, though you may get it at a reduced price as a previous customer. You might only get this discount if you are upgrading from the immediate previous version. There may not be a discount if you are upgrading from software already two or more versions old. Minor versions are usually bug fixes and may introduce new features through these patches. Minor versions also tend to be free to legitimate owners of the current version. You may have to register with a company to be aware and gain access to download these minor version patches.

Major version: 2.1.8 -> Upgrade -> 3.0.0
Minor version: 2.0.9 -> Upgrade -> 2.1.0

Maintenance: Maintenance is similar to insurance in Blackjack. You take a gamble with a small amount of money to say that the company will release a new version in the next year or two (depends on your maintenance agreement). If the company does release a new version, you get to upgrade at no additional cost. Microsoft offers a similar agreement with its Software Assurance.

Whether or not you want maintenance with your license depends on whether A) you are going to want to upgrade to a new version and B) the company releases a new version in the time frame of your maintenance.

Freeware: Freeware is exactly as the name implies: free software. The software does not cost anything. There may be an additional cost for support (and this may be how the company pays the bills). Freeware licenses must still be read closely though; a majority of freeware is free for home users and for personal use only. A commercial license may be required for commercial use (you make money indirectly or directly from using it). Educational and non-profit institutions may be eligible to at least receive a discount or use the software for free.

Open-Source and other licenses: You should be aware of other licenses that exist out there. This typically explains what you can and cannot do (like modify, re-publish, take credit for, or modify without releasing the source code).

GPL, Creative Commons, and many others.

For more information about software licenses in general and specifically for business use, visit the Business Software Alliance website for a lot more instructions, tools, and advice.