The Two Most Common Software License Metrics

Historically, there have been two main types of Software License – Node Lock Licenses and Concurrent Use Licenses. These two license metrics are distinctly different from one another, and each has its strengths and weaknesses. In recent years we have started to see much more variety in how licenses are written. Some of this is driven by the proliferation of Virtual Computing and Cloud Computing.

A Node Lock License, or per device license, is in some sense the absolute simplest license type. In order to install the product on a computer, you must pay for a license for that computer. In order to install it on 5 computers, you must pay for 5 licenses. Absent any mechanism for active license enforcement, this would be the most obvious choice for a software license agreement. For this reason it has been around since the early days of software, before the internet could allow anything more sophisticated.

For the software licensee though, there are two things that make this license type unattractive. The first is that a computer using a product briefly once every 6 weeks costs just as much as a computer using the product for many hours every day. Second, even a computer that has stopped using the product entirely for 1 year still consumes an entitlement until the program files are removed entirely from the computer.

A Concurrent Use License, or Floating License, is conceptually simple – it allows a fixed number of copies to be running at once at any point in time. In order to enforce such a license though requires technology to communicate with a central server and further to prevent a launch from succeeding if appropriate. This metric is as fair as possible to the licensee. If they have the technology to enforce the concurrent limit, they really don’t have to do much of anything else. They can install the product anywhere they want to, then simply pay for licensing based on peak demand. KeyServer by Sassafras Software was truly a pioneering technology which allowed this license metric to exist.

In more recent years, it is really the only metric for which Virtual Computers seem irrelevant. As long as usage in a virtual environment can be seen just as it can in a physical environment, the mere fact that it is virtual should not make any difference – this metric measures actual use. Conversely, virtual computers can be a sticky subject for Node Lock Licenses, since the definition of what a computer is starts to get fuzzy, and one might argue that a Virtual Machine is readily accessible to many more users than a physical computer could ever be.

For any given site, comparing a Node Lock License to a Concurrent Use License, it is clear that the site will require fewer Concurrent Use Licenses – in some cases many fewer. While this could be seen as a negative for the software publisher, the simple solution is to charge more for a Concurrent Use License. The publisher can determine a price at which they feel revenue from an average customer will the same as for a Node Lock License. The customer should be willing to pay the same price, or perhaps even higher, for the simplicity of not having to do selective installs, or implement a process of periodic uninstalls. Still, this price point may be hard to choose, especially if usage patterns for the product vary widely, or include much usage of extremely short duration.

Other license metrics include Named User Licensing, which is almost identical to Node Locked Licensing, but counts users instead of counting computers. Subscription Licensing is a derivative of either Node Locked or Named User, where an expiration date is included, so recurring payments must be made. At Sassafras, we have created a license metric we call a Lease License, which falls in between a Concurrent Use License and a Node Lock License. Read more about this powerful license metric in our post What Is a Lease License?

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