Each piece of software that you purchase for your business will come with a license stipulating what you can and can’t do with it, and it is essential that you fully understand the terms of the license to ensure that you stay legal.

Each piece of software that you purchase for your business will come with a license stipulating what you can and can’t do with it, and it is essential that you fully understand the terms of the license to ensure that you stay legal.

Understanding software licensing and purchasing the correct licenses for your needs can also help your business to save money. Most off-the-shelf software packages come with a single-user only license, and thus if you want more than one person in your company to use the software you would have to purchase multiple copies, which can work out expensive. By purchasing a different type of license such as a multi-user license or a site license you can save a significant amount of money.

Information contained in a software license

Software licenses can be long and look complicated but don’t let that be an excuse for not reading them. Essentially a software license usually contains two pieces of information that you should pay particular attention to:

  • The number of computers on which the software can be installed and how many users can run it. Some software is single-user only, while others can be installed on multiple computers in your organisation.
  • The type of user permitted to use the software. Some licenses permit the software to be used only by home-users or non-profit organisations, for example, whilst others allow it be used for business purposes.

Software licenses can also contain information on resale and copyright restrictions, and it may also include restrictions on the length of time the software can be used for - in most cases this is unlimited, however certain licenses require a renewal fee to carry on using them. Also look out for things such as product-activation, which requires you to verify you are running an authentic copy of the software before you can carry on using it.

Types of software licenses

Single-user licenses

Most off-the-shelf software comes with a single-user license that, as the name suggests, permits the software to be used by a single user on a single computer.

Multiple-user licenses

Unsurprisingly a multiple-user license allows more than one person to use the software. The permitted amount of users will be specified in the license, together with any other terms.

Site licenses

A site license allows anyone on your business premises to use the software. 

Why are software licenses important?

Some businesses don’t understand software licenses or simply to choose to ignore them, and that can land you in some serious trouble. Computer software can be expensive and some organisations believe that they can ‘get away’ with ignoring software-licensing terms and do things such as installing software on multiple computers when the license is for a single-user only. Using software outside of the license terms is classed as piracy and could lead you open to prosecution.

What happens if I use unlicensed software or break the license terms?

Fines can be heavy, with one company in 2007 being fined a reported £250,000 for using unlicensed software. It is best to ensure that your business is using the correct software licenses and stays legal from the beginning. Further advice on software licensing is available from the Business Software Alliance.

How do you select the correct software license?

The main things you need to think about when purchasing software are what you are going to be using the software for, how many people will use it and on how many computers it will be installed. If you are using the software in your business then first of all you need to ensure that the license allows this and that it’s not designed just for non-profit organisations. If more than one person will use the software, off-the-shelf single-user software can work out expensive and is often a big waste of money in many businesses.

By purchasing an alternative software license, such as a multiple-user license or a site license, you can usually save a significant amount of money. Always remember to investigate the details of the license in full and watch out for unusual or restrictive terms. Software that requires you for example to pay a yearly license fee for each user might work out expensive, even if the software is cheap to buy up front.

Whatever your industry, analysing your IT needs is essential to keep costs down and ensure all hardware and software meets your requirements in the long-term.