What is a software licence?

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

But software licences 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 licence explicitly spells out exactly how the software may be used without infringing on copyright law.

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


The software licence 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 licence, 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 licences, defining which features a user may and may not access.


Software licence is available only for a predetermined period of time, after which the licence 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 licence is based on usage, which is recorded locally and reported back to the software suppliers’ servers. Metered licences 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 licence for a specific time period, without the need for online access.


Often used with free and open-source software, permissive licences 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 licences 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 licence allows for a set number of users within a group.


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

Public domain

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


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


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


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


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 licences 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 licence is implemented. On-premises licences must be fully installed on an organisation’s local servers, while SaaS licences 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 licences define exactly how, when and by whom software and applications may be used. More specifically, software licences 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 licences, there are also a number of software-licence 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 licences which can be passed between multiple users.
  • Monthly/annual pricing
    Software licences renew and are charged on a recurring basis, either every month or once a year.
  • Package-based pricing
    Software licences are offered in specific packages, allowing users to access a set number of features at a specific cost, with more features available in higher-priced packages.
  • Perpetual pricing
    After a one-time fee, the software licence 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 authorisations can lead to intentional or accidental infringement. Software licences serve as a reliable safety net, protecting business and end users from dangers and legal penalties.

More specifically, software licence agreements provide the following advantages:

Prevent software abuse

Unrestricted by software licences, 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 licences allow organisations 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 licence the same software to multiple users.

Define liability

Liability is a complex issue in software usage. Software licences 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 licences can provide disclaimers on warranties, further establishing responsibility and protecting organisations 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 licence that gives the organisation the right to revoke licences prevents time-consuming and potentially expensive disputes from erupting and provides more complete control over the proprietary software.

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

ServiceNow Software Asset Management empowers organisations to:

  • Enhance oversight and minimise waste
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  • Reduce financial and litigation risks with licence compliance.

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

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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