Guide

Computer software for business

Types of software licences for business

All software applications need a software licence in order to run. A licence describes terms and conditions under which you can use and distribute software.

Common types of software licences

Proprietary software is software developed by a supplier and made available for use under an end-user licence agreement, which you effectively accept when you install the software.

There are three different types of proprietary software licenses:

1. Per device licences are usually for one installation of the software on a server, computer, phone or other device. This is the most common type of licence for software. Some versions of this type of licence may require you to activate the software. This allows the supplier to check that the software is installed on just one PC.

2. Per user licences are common where more than one person can use the software simultaneously. The licence is usually for a specified maximum number of users.

3. Site licences are much less restrictive. They typically allow as many users as you wish at one location.

Licensing also applies to open source software, but terms and conditions of use are generally more lenient – see more on open source licensing and legal issues.

Software licensing and the law

The licence sets out how you can use the software. It usually prohibits you from doing certain things, like:

  • making copies and passing them on
  • selling your licence to someone else

Most proprietary software is copyrighted and comes without the source code, ie the code originally written by the programmer. Without this code, neither you nor any other software supplier can make changes to the software package.

When you buy proprietary software, you buy the right to use it in a specific way. The software company retains ownership of the software.

Software piracy

Software licences are often expensive. It may be tempting to buy just one licence for a product and copy it for several users. However, you and your business could face prosecution if you are discovered doing this.

Be wary of buying very cheap software or operating systems as they may well have been pirated by criminals. Consider investing in software that monitors applications running on your system and builds up an inventory for you. This is a good investment, partly for your own resource management and partly because it helps you counter allegations of running unlicensed software.