The Cloud and SaaS: Does Software Licensing Matter?

As a SaaS vendor, perhaps you view monetizing your services in terms of managing subscriptions for tiers of services. We’ll just implement the subscription management and associated payment processing as part of the development process, you say. Software licensing technology plays no role, because after all you have no need to node-lock the SaaS server applications that you’re hosting on your own servers, right?

Or is it that simple? There are a few things it would behoove you to consider, especially when your SaaS service is targeted at businesses rather than consumers. Presumably you’d like to control and limit sharing of your user subscriptions even though your users are accessing your services from any number and type of remote browsers and mobile devices, in order to prevent revenue leakage. Maybe implement more sophisticated and flexible pricing models based on metered usage and / or feature bundles – and use real time analytics and A/B testing to experiment with pricing models and price points (perhaps even dynamically). Perhaps you’d like to target both small businesses and enterprises? And provide your enterprise customers with visibility into usage of their software for compliance reasons?

How do you address these requirements? You could bite the bullet, develop the necessary expertise and extend your development lifecycle to incorporate the necessary functionality. And / or develop two releases of your product: a SaaS offering for small business that you host, and a traditional server product that you deploy to enterprise environments, bundled with an appropriate floating license server or equivalent – and incorporate the necessary operations procedures for deployment and entitlement management of your enterprise product licenses.

Or is there a better way? For example, an available cloud-capable software licensing technology that you can leverage? What would such a technology look like? For starters, the system itself would be available as a SaaS service – most likely a multi-tenant server, for achieving the economies of scale needed to accommodate a cloud-based environment. You would simply hook your application and back end system into it with a handful of Web Services API calls for simplicity, and a more sophisticated client library in order to accomplish more complex objectives. The licensing service would be capable of handling large populations of individual user licenses as well as enterprise pools of anonymous or named users (aka. “floating licenses” over the cloud), where a “user” could be any mobile device, an “internet of things” device, or a conventional laptop or desktop. The system would automagically remotely node-lock the users for periods of time that you decide, so as to limit or prevent sharing of user subscriptions – and you wouldn’t have to integrate any of the remote agents with the licensing system in order to accomplish this. The Internet environment, with its attendant security and reliability issues, would be readily accommodated out of the box with this licensing system. Your enterprise customers could login to your licensing system and administer individual user licenses in their respective pools in self-service mode. And neither you nor your enterprise customer would incur the operational overhead associated with entitlement management that is ordinarily the bane of enterprise software licensing. The licensing system would of course maintain an exhaustive audit trail that both you and your enterprise customers would use for auditing and compliance management, in addition to serving as a source for generating analytic reports. And not least, such a solution will readily integrate with payment processing systems via Web Services API calls and webhooks.

The advantages of using this dream licensing system in the cloud are course the usual benefits of leveraging a third party solution as opposed to building your own: you can not only dramatically cut your development time and schedule risk, you will also achieve a level of high-business-value functionality that you ordinarily would not consider due to implementation cost and the learning curve associated with acquiring the necessary knowhow, not to mention the distraction factor of getting into the infrastructure business. One small detail is of course finding such a third party cloud-native software licensing solution that scales.

So, does software licensing technology matter for cloud-based SaaS services? Not so much for consumer-oriented offerings (but more than you may think), and a great deal for B2B offerings, especially enterprise applications offered over the cloud. What do you think?


Vinay Sabharwal is CEO of Agilis Software LLC, a provider of cloud-native software licensing solutions to ISVs worldwide since 2002. He can be reached at

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