5 Options for Software Licenses: Which One Is Best for Your Business?

by Kate Morrical
- Sep 12 2014 - 3 min read

Once upon a time, buying computer software was easy. You went to the store, picked up a box, brought it home, and installed it on your computer. (That computer probably took 5.25-inch floppy disks, but that’s another story.) Today, you have many more options when it comes to acquiring the software licenses you need for your business. Which option should you use, though, and when? Let’s break down the five options.

1. Stand-Alone. Stand-alone software licenses are the simplest model of all. One stand-alone license can be installed on one computer, or assigned to one person. That’s it. Occasionally some vendors will permit a second installation in a laptop or home computer, but typically each person/computer needs a separate license.

Pros: The person with the software always has it whenever he or she needs it.

Cons: Nobody else gets to use it unless they borrow that computer. You need to buy one seat for every computer/person (and then keep track of those licenses!), even if the software isn’t in use very often.

2. Networked. As soon as you have multiple people who need access to a program, whether at the same time or not, you’ll want to look at a shared-licensing model. The most common of these is a network license, where you pay for a number of seats that represent the number of people who can access the software simultaneously. For example, if you buy five seats of a program, the first five people to run it get a license. The sixth person who tries is locked out until someone closes the program.

Pros: You can optimize the number of seats you buy for the number of people who need access at the same time, and it’s usually easy to add more if demand increases.

Cons: Maintaining a local license server takes a bit of IT know-how, and if it goes down, you lose access to the software.

3. Site. Some software companies offer site licenses, where you pay a single flat fee for everyone in your office to get access to the product.

Pros: Everybody in your office can have access, and no one is ever locked out. Can be very cost-effective for large offices.

Cons: You might be paying for more access than you need. Not always cost-effective for small offices.

4. Cloud. A cloud license is similar to a networked license, except the license server doesn’t exist in your office. As with a regular network server, you have a limited number of simultaneous usages, but someone else maintains the actual server.

Pros: You can still pay for only the number of seats that you need to have in use at the same time, so sharing is easy. All you need to access the software after setup is an Internet connection, and someone else does the heavy lifting of keeping the license server running. It’s also easy to add seats if you need them.

Cons: No Internet, no software.

5. Subscription. Renting software on a subscription basis, rather than buying a so-called perpetual license, is the newest model of software purchasing. It’s most similar to stand-alone licensing because licenses are usually assigned to people (or email addresses) instead of shared in a pool. But the real innovation is that instead of paying a large sum up front, you’re billed monthly (or quarterly, or even annually) in a contract that you can cancel at any time. Much cloud-based software is now exclusively subscription because there’s nothing to download—you’re just paying for access instead.

Pros: Subscription software is perfect for short-term projects, temporary staff, or other situations when you need access to a program for a limited amount of time instead of on an ongoing basis. It’s also often appropriate for cloud-based programs that don’t necessarily have desktop components.

Cons: Keeping track of subscription licenses requires a lot of attention. (Who needs it? Who has it? Do they still need it?) With a little bit of planning and understanding, you’ll be able to get the licenses you need when you need them. And we all lived happily ever after! For a visual illustration on the benefits of subscribing to software, take a look at the infographic below.

software licenses

More Like This


You’re in.

Get smart on the future of making.

Subscribe to our newsletter.