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Selection Point

Software licensing agreements have become much more complex over time, changing the way organizations both purchase and use software. Whether purchasing large enterprise applications or desktop productivity suites, the software license an enterprise chooses can have a profound impact on the return on investment (ROI). Depending on the needs of the business, each licensing model offers distinct strengths and weaknesses from both a basic cost and productivity perspective. Organizations require a licensing arrangement that puts software in the hands of users who need it while trying to avoid paying for overpriced shelfware.

Key Selection Criteria

Software licensing is a legal agreement between an enterprise and a vendor that grants permission for the installation and use of software on a workstation or network. The terms of usage are specified in the details of the license agreement. Over time, vendors have established a number of different types of licensing arrangements that vary in terms of the number of licenses issued, the way the licenses are distributed, and most importantly, cost. This note reviews the most common software licensing models. The usage scenarios and the advantages and disadvantages of each arrangement are informed by Dinesh Bettadapur’s IEEE article, “Software Licensing Models in the EDA Industry.” 

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