What is a software license?

A software license is a legal contract between software creator and end user, designed to copyright and protect software as intellectual property.

But software licenses are more than simple click-to-proceed terms and conditions; they outline specifically what the end user can and cannot do with the creator’s software, providing legally binding definitions for distribution and use. They also clearly identify the rights of the user, including those related to liabilities, installation, and warranties. In other words, the software license explicitly spells out exactly how the software may be used without infringing on copyright law.

While all software licenses perform the same basic function of the outlining legally-accepted use of the software in question, there are many different subcategories of software licenses. These categories are not necessarily exclusive; different kinds of software licenses will often overlap.


The software license applies only to a specific device; the software application can only be used on the device or devices outlined in the agreement.


Any modifications or extensions to the original software must be distributed under the same software license, carrying the same designation and restrictions.


Device licensing grants software use to a specific number of devices.


Specific features of an application carry with them their own licenses, defining which features a user may and may not access.


Software license is available only for a predetermined period of time, after which the license expires and the user is no longer eligible.


Open-source libraries that have been modified or have had portions copied into the application may be linked in the software.


The software license is based on usage, which is recorded locally and reported back to the software suppliers’ servers. Metered licenses often feature a pay-as-you-go (PAYG) model, and can be based on time duration, number of uses, or other factors.


The user can check-out the license for a specific time period, without the need for online access.


Often used with free and open-source software, permissive licenses contain only minimal requirements for the modification and distribution of the software.


After purchasing the software, the end-user can access and use it without regard to any set time duration; perpetual licenses allow users to continue to use the software forever, within the confines of the agreement.


The software and all its associated rights are reserved. The software may not be modified or redistributed in any way.


The software license allows for a set number of users within a group.


Designed to facilitate coordination regardless of location or company, project-based licenses grant usage to project team members under the main license, even when the team is spread out across multiple organizations.

Public domain

This is a permissive license that allows essentially anyone to use and modify the software without restriction.


A subscription license allows users to access software on a recurring basis for a legally defined period of time. Many such licenses automatically renew after the initial term, with no definite termination date.


Often existing as part of a perpetual license, support-and-maintenance licensing allows for ongoing updates and fixes provided by the software supplier.


A type of fixed duration license, trial licenses allow users to try out software features for a limited amount of time before choosing whether to commit to the full license.


Use-time licensing is a subset of metered licensing, allowing users to access the software either until a specific end date, or for a preset number of hours.


Whitelist licenses allow a group access to software, based on a defined list of users.

Another key distinction in software licensing that is worth considering is how and where the license is implemented. On-premises licenses must be fully installed on an organization’s local servers, while SaaS licenses are accessed and managed remotely over the internet. SaaS software licensing is generally regarded as an advancement over on-premises licensing, offering increased flexibility and security, without demanding in-house maintenance.

As previously stated, software licenses define exactly how, when, and by whom software and applications may be used. More specifically, software licenses define and outline the following:

  • Number of eligible users of the software
  • Dates and usage duration
  • Copyright infringement details
  • Contractual obligations of software provider
  • Problem mediation processes
  • Distribution permissions and limitations
  • Use rights, including modification and copying

Just as there are many different kinds of software licenses, there are also a number of software-license pricing models. These models may also feature some overlap.

  • Volume/tiered pricing
    Companies pay less per user as the number of users grows.
  • Named pricing
    Every user has their own individual log-in information and is accounted for in the pricing model.
  • Concurrent pricing
    The company purchases a set number of licenses which can be passed between multiple users.
  • Monthly/annual pricing
    Software licenses renew and are charged on a recurring basis, either every month or once per year.
  • Package-based pricing
    Software licenses are offered in specific packages, allowing users to access a set number of features at a specific cost, with more features available at higher-priced packages.
  • Perpetual pricing
    After a one-time fee, the software license may be used perpetually and without recurring charges.

In a perfect world, businesses would always be able to trust their customers to be fair and responsible in using their intellectual property. But while most customers have no intention of misusing proprietary software, undefined permissions, copyrights, and authorizations can lead to intentional or accidental infringement. Software licenses serve as a reliable safety net, protecting business and end users from dangers and legal penalties.

More specifically, software license agreements provide the following advantages:

Prevent software abuse

Unrestricted by software licenses, there is very little preventing users from copying, modifying, or even reselling proprietary software. Proper licensing ensures that the software is being used correctly, and that fair payment is going to the developer.

Retain software ownership

Software licenses allow organizations to ‘rent out’ software to their users, rather than selling it outright. The software creator retains ownership, and can dictate usage and distribution, and can license the same software to multiple users.

Define liability

Liability is a complex issue in software usages. Software licenses define liability and responsibilities, protecting both users and vendors and ensuring fair liability in the event of an emergent legal issue.

Disclaim warranties

Sometimes users have expectations that cannot be fully met by the software they employ. In these cases, software licenses can provide disclaimers on warranties, further establishing responsibility and protecting organizations when problems occur.

Terminate use when necessary

Although it’s certainly not good business to terminate or suspend user access without good reason, it’s always good business to retain the right to do so. Including a clause in the software license that gives the organization the right to revoke licenses prevents time-consuming and potential-expensive disputes from erupting, and provides more complete control over the proprietary software.

Software licenses are vital to ensure that modern software vendors and their customers are protected, and that proprietary software is being used correctly and inline with established practices. Unfortunately, navigating license complexity and building air-tight license management practices can be extremely difficult. ServiceNow Software Asset Management provides the solution.

ServiceNow Software Asset Management empowers organizations to:

  • Enhance oversight and minimizing waste
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  • Reduce financial and litigation risks with license compliance.

Running on a single-architecture platform, Software Asset Management provides powerful visualization tools for managing, prioritizing, and taking action on compliance and cost issues. Additionally, detailed, yet-easy-to-use dashboards allow for simple license compliance review, monitoring, and optimization.

Protect your business from compliance risks, while also improving outcomes and cutting spending. ServiceNow Software Asset Management makes it all possible.

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