Software use is an essential component of any modern business. From operating systems and office suites to development platforms, cybersecurity solutions, and industry-specific tools, software drives productivity, innovation, and data protection. However, not all programs are governed by the same usage rules. Therefore, understanding the types of software licenses is key to ensuring legal compliance, optimizing resources, and avoiding unnecessary risks.
In this article, we at Asta explore the main types of software licenses, their features, and how to choose the right option for each business need.
What is a software license?
A software license is a legal contract between the software developer or provider and the user (individual or business). This contract establishes the terms and conditions under which the program may be installed, used, modified, distributed, or shared. Unlike other physical products, software is not strictly “purchased”; you obtain a license to use it under certain rules.
General Classification of Software Licenses
We can divide software licenses into two broad categories:
- Proprietary software
- Free and Open Source Software (FOSS)
Let’s look at their main differences and the most common types within each group.
Proprietary Software
This type of software is created and distributed by a company that retains all rights to the source code, meaning users cannot freely view, modify, or distribute the program. The licenses establish precise limitations on its use.
A) Perpetual License
Allows the user to use the software indefinitely, after a single payment. They do not usually include major updates or technical support beyond the initial period. This is common in locally installed business software.
Advantages:
- One-time payments without subscriptions.
- Local control of the software.
Disadvantages:
- Does not automatically include new versions.
- May require on-premise infrastructure.
B) Subscription Licensing (SaaS)
The Software as a Service (SaaS) model is based on a periodic subscription (monthly or annual) to access software, usually from the cloud. It is the dominant model today, adopted by platforms such as Microsoft 365, Adobe Creative Cloud, and Salesforce.
Advantages:
- Always up-to-date.
- More predictable and scalable costs.
- Ideal for remote work and collaboration.
Disadvantages:
- Vendor and internet connection lock-in.
- The cost may exceed that of a perpetual license over the long term.
C) Per-user/per-device licensing
Software use is limited to a specific number of users or devices. This is common in corporate environments where it is necessary to control who accesses each tool.
Advantages:
- Clarity in usage control.
- Supports audits and asset management.
Disadvantages:
- Incremental costs if the company grows.
- May require rigorous monitoring to avoid non-compliance.
D) OEM (Original Equipment Manufacturer) License
This type of license comes pre-installed on hardware (such as computers or servers) and is tied to that specific piece of equipment. For example, operating systems that come with a new laptop.
Advantages:
- Reduced cost.
- Immediate installation.
Disadvantages:
- Cannot be transferred to another device.
- Limited support in many cases.
Free and Open Source Software (FOSS)
In contrast to proprietary software, free software allows the user to view, modify, and distribute the source code. It does not necessarily mean that it is free, although it usually is.
A) GPL (General Public License)
The GNU General Public License (GPL) is one of the most common. It allows the software to be modified and distributed, but any derivative software must retain the same license (copyleft).
Examples: Linux, WordPress.
Advantages:
- Transparency and security.
- Freedom to modify and adapt.
Disadvantages:
- Requires technical knowledge.
- May not have official support.
B) MIT License
One of the most permissive licenses. It allows virtually everything: use, copying, modification, and distribution, even with proprietary software, as long as the copyright notice is included.
Advantages:
- Total flexibility.
- Widely used in academic projects or startups.
Disadvantages:
- Less protection against commercial uses without contribution.
C) Apache License
Allows use and modification of the software, but protects the original developer with a patent disclaimer. It is common in large collaborative projects.
Advantages:
- Ideal for business environments.
- Balances freedom and legal protection.
How to choose the right license for your company?
Selecting the right license type depends on multiple factors:
- Organizational size and structure: Small companies may opt for SaaS or free solutions; large corporations need control and support.
- Level of customization required: If you are looking to adapt software to internal processes, open source can be useful.
- Budget: Perpetual licenses require a higher initial investment, while SaaS allows you to spread the cost.
- Compliance and Audits: Proprietary licenses with enterprise support help avoid penalties and maintain compliance.
- Scalability: Subscription or per-user models are better suited to growth.
At Asta, we help companies evaluate, plan, and optimize their licensing strategies, combining regulatory compliance, operational efficiency, and financial sustainability.
Risks of License Misuse
Ignoring or misinterpreting software licenses can have legal and financial consequences:
- Fines for unauthorized use
- Loss of technical support or access to features
- Reputational damage
- Security vulnerabilities due to pirated or outdated software
Proper software asset management is an essential part of a robust and secure IT strategy.
Conclusion
Understanding the different types of software licenses and their characteristics is essential for making informed decisions within a company. Whether choosing between perpetual, subscription, or OEM licenses, or exploring the advantages of open source, the goal should always be to align the software with business needs, ensuring legality, efficiency, and sustainable growth.
At Asta, we support organizations in their digital transformation with a strategic and personalized approach. From IT consulting to license and asset management, we are committed to the success and security of our clients.
Want to know if your company is using its software licenses correctly?
Visit www.asta.com.au/technology-consulting-services/software-license-optimisation-audit and discover how we can help you optimize your technology infrastructure.
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Asta is a leading full-service technology and consulting agency. We’re trusted industry leaders, who are committed to advancing businesses through powerful IT. Yet, beyond our IT acumen in software, web and mobile app development, our fit-for-purpose managed IT service solutions and our ground-breaking AI and blockchain technologies – there’s something more.
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