Software license types determine how an organization can use, install, and distribute a program—and choosing the wrong model leads to unnecessary costs, exposure to audits, and risk of non-compliance. From perpetual licenses to SaaS subscriptions, this guide explains each model, its benefits, and how structured license management protects operations.
What is software licensing?
Software licensing is the process by which a developer authorizes the use of their technology under contractual conditions defined in the EULA (End User License Agreement). The EULA determines when the license takes effect, how the product can be installed, how many devices or users can access it, and what the licensee is permitted to do.
In practice, a license does not transfer ownership of the software—it transfers the right to use it within the agreed-upon limits. A license purchased for a single device, for example, cannot be installed on other devices without breach of contract.
Cloud and SaaS licensing
In Software as a Service (SaaS) models, licensing is dynamic and subscription-based. Contracts typically define monthly or annual charges per user, renewal and cancellation conditions, refund policies, and plan limitations. These parameters ensure financial predictability and operational flexibility for growing companies.
Main types of software licenses
1. Traditional and Perpetual Licenses
- Perpetual license: A one-time purchase that grants lifetime usage rights. It may require an annual maintenance fee and is increasingly being replaced by subscription models.
- Support and maintenance license: Extends a perpetual license by providing updates and security patches during the contracted period.
2. Term and Subscription Licenses
- Subscription license: Recurring monthly or annual payment with automatic renewal. This is the predominant model in modern enterprise software.
- Fixed-duration license (FDL): Limited use for a predetermined period, regardless of recurring payments.
- Fixed-term enterprise license: Similar to an FDL, but shared among employees with limited concurrent use.
- On-demand enterprise license (ODC): Shared use with a cumulative time limit—for example, a total of 365 days across all users.
- Trial license: Temporary and free access for evaluation before purchase.
3. Usage-based and consumption-based licenses
- Metered license: Charges are based on actual resource consumption, such as CPU time, data volume, or number of accesses. The model is flexible, but costs can vary.
- Usage-time license: Limits the total amount of time a user can access the application.
- Aggregate usage-time license: Combines the usage time of a group, helping control costs in projects with rotating teams.
4. Shared and collaborative licenses
- Floating license: A pool of shared licenses among users — access is granted on a first-come, first-served basis up to the contracted limit.
- Project-based license: Allows multiple users, including users from different companies, to access the software under a single master license associated with the project.
5. Licenses with specific restrictions
- Resource license: Controls which specific features the licensee can access within the software.
- Anchored license: Linked to a single identified device — it cannot be transferred without a formal process with the supplier.
- Device license: Assigned to a set of devices rather than individual users. This model is common in industrial and IoT environments.
- Offline usage license: Allows operation without an internet connection for a specified period.
- Allowlist license: Restricts access to previously authorized users on a controlled list.
6. Licenses by target audience
- Academic license: Designed for educational and research institutions at a reduced cost or free of charge. Its purpose is to familiarize students with industry tools.
Benefits of Software Asset Management (SAM)
Software Asset Management (SAM) is the discipline that centralizes the control of all software licenses within an organization. Three direct benefits justify its adoption:
- Visibility and waste elimination: Identifies unused licenses, prevents unnecessary renewals, and reduces total software costs.
- Cost optimization: Helps organizations purchase the right license types in the appropriate quantities and negotiate volume discounts during renewal.
- Compliance and legal risk mitigation: Noncompliant organizations may face audits, retroactive payments, financial penalties, and disputes with vendors.
Risks of using unlicensed software
Using software without a valid license exposes an organization to security vulnerabilities: pirated programs often contain malware and do not receive security patches. It also creates legal risk related to intellectual-property infringement, while the lack of technical support increases the operational impact of failures.
How to ensure licensing compliance
A structured compliance program includes maintaining a continuous, automated inventory of installed software; using SAM tools to track and audit licenses; reviewing contracts regularly; defining internal installation and usage policies; and selecting vendors with a reliable support history.
The 4MATT, a ServiceNow Elite Partner in Brazil and recipient of the ServiceNow Technology Excellence Partner Award 2024–2025, implements SAM on ServiceNow with more than 80 certified specialists. Native integration among SAM, CMDB and ITAM provides end-to-end visibility into the software asset lifecycle, from acquisition through decommissioning.