As its name suggests, software licensing refers to the process of creating a legal agreement or contract between the developer and the user that outlines how the latter may use or distribute the digital product. Also referred to as EULA or the end-user license agreement, the document generally defines the responsibilities of all parties involved to protect and prevent issues like copyright infringement from occurring.
Usually, software licenses address concerns, such as whether or not users may view the program’s source code, if they can redistribute, alter, or copy the application, the frequency of installation, and what devices they can use it with.
Importance of software licensing
Before any commercially available software is installed, there needs to be a legal license. Otherwise, it can be regarded as a copyright law breach. For enterprises acting as end-users, understanding how software licensing works and having the proper license management software can be especially important, as it not only keeps them from paying unnecessarily for licenses they don’t use, but more importantly, it ensures that they avoid the potential lawsuits that may arise from a lack of awareness.
Moreover, agreements in software licensing protect investments of time, resources, and energy, ensuring developers and suppliers are able to generate revenue from their work. Other reasons for the acquisition of software licenses are the following:
- Preventing abuse and misuse of the product. Without a software license, there’s nothing to stop users from copying the program for their benefit. People who pirate digital products typically do it to avoid paying for them. However, it’s also not uncommon for them to sell them as their own. Either way, it can cost the business income.
- Enables licensing without selling. One software monetization method companies use is selling the license of a product without losing rights to it. It enables them to license the software without having any usage restrictions. As a result, it gives them control over the way the applications are distributed and used, presenting them with more opportunities to generate revenue over time.
- Gives a chance for disclaiming warranties. Consumers generally have expectations whenever they make purchases, and software solutions are no exception. By incorporating warranty disclaimers in the licensing agreement, businesses can be required to accept how the software is available, alleviating some of the risks in turn. It also gives companies the freedom to suspend or revoke licenses if necessary.
- Limits liability. Liability is increasingly becoming a common issue, especially among software developers. Unfortunately, it can result in potentially costly lawsuits that can reduce the company’s financial resources and the brand’s value. For this reason, keeping any liability risks at a minimum is vital. And through agreements like software licensing, businesses can limit liabilities, if not avoid them entirely.
Software licenses are agreements that safeguard companies and customers alike by ensuring all parties and programs meet their requirements. It also allows businesses to create a revenue stream for their work while ensuring that applications fulfill their intended purpose for consumers. Thus, it’s always recommended to have a licensing agreement for any software product.