Licensing as a Service (LaaS) can offer software vendors many advantages over developing a licensing engine in-house. The aim of this blog post is to develop an understanding why the concept of software Licensing as a Service has emerged, and why it is worth considering for any software company.

Licensing as a Service enables you to support a wide variety of license models and application types and allows you immediate access to a best-of-breed solution that you pay for either monthly or based on what you use.

LaaS could overcome many, if not all, of the limitations created by more traditional licensing methods such as dongles. Software Licensing as a Service also offers software publishers more flexible and effective means of monetizing their software products quickly and easily.

Software licensing - how did we get here?

To understand the advantages of Licensing as a Service, a bit of background to software licensing in general is needed. If you're already familiar with it, feel free to skip ahead a couple of chapters.

If you are an independent software vendor (ISV) or a software publisher you will most likely want to monetize the software application you have developed.

The terms under which you provide your software to a customer are defined by the software license - how much the customer has to pay, for how long, which versions of your application does their license apply to, etc.

Historically, a lot of software products were licensed on a perpetual license under which the customer paid once, but then could pay an option annual maintenance fee to continue to receive newer versions of the application, bug fixes and perhaps some support. As more and more software is being provided online, there has been a shift away from the limitations of perpetual software licensing to much more sophisticated licensing models that can be better suited to the software product being sold.

In order to overcome the limitation of traditional licensing methods and to capitalise on the opportunities created for software publishers by the Internet, a new method of software licensing has emerged called Licensing as a Service (LaaS).