Blog Entry

Aug 12

Splitting Hairs or Just Good Discipline?

I don’t have many pet peeves in life. Okay, my kids will tell you I’m the typical dad who gets irritated when they leave the lights on in their rooms and monkey with the thermostat. But besides that, I roll with things pretty well.

Then comes perhaps my only work-related peeve: the misuse of the term “license”. I am sure it stems from my IBM days where teams of gifted lawyers spend oodles of cycles slicing, dicing, chopping and julienning seemingly simple concepts and produce software license agreements of Tolstoyian proportions.

Here’s the bottom line: the “license” is the thing a consumer purchases which grants them the right to use the product. That tiny little file that gets generated, is often managed by a “license server” and is needed by the product to run… that thing licensing vendors like to call “the license”… is not the license, my friends. Call it a key. Call it an activation file. Call it a token. Call it the silver bullet. Call it anything you like, really… as long as you don’t call it a license. Because it simply is not.

Am I splitting hairs?

Let’s walk through a couple examples that came from real-life scenarios.

If Company X buys one license of software from you and then doesn’t generate and take delivery of their product key/activation/token, do they still own the right to use the software? Of course they do. That’s because the “license” is the thing they bought, the key is just a small piece of software the helps the product run. They are not equivalent.

Flip that around and you can see the same point: If Company X does NOT buy a license of software from you but somehow gets a copy of a product/key/activation/token, would you say they own the right to use your software? Certainly not. Again, it’s because the “license” is the thing they should have bought which would have given them the right to use the software. Holding a key is not equivalent to owning a license.

Example number two:

An ISV sells products A and B as individual software licenses and also sells a bundle that consists of components A and B (what I like to refer to as the Happy Meal o’ Software). Company X buys one copy of the bundle and the ISV delivers one key for component A and one key of component B. How many licenses does Company X own? Answer: one! If they bought one copy of the bundle, they own one license – period. The ISV could deliver zero keys, one key, two keys or a thousand keys and it does not change Company X’s right to use ONE license of the software.

Still think I’m splitting hairs?

During my IBM days, I sat on multiple calls with customers, sales reps, contracts teams and lawyers discussing this exact issue at length. The customer bought N number of licenses of a 2-component bundle and IBM delivered one key for each component, thereby giving the customer the (incorrect) impression that they own 2*N software licenses. Sorry. The “ah ha” moment typically came when I encouraged the customer to remove the license keys from the equation altogether and then ask themselves how many users would have the right to use the product if they bought 100 licenses and we had no enforcement at all. It’s easy to see the answer is 100. At the end of the day, we had frustrated customers who thought they owned more software than they did and sales teams burning non-revenue generating cycles simply because we were weren’t crisp and disciplined with our terminology. Lesson learned.

Unfortunately, the license enforcement technology vendors only add fuel to the Fire of Confusion. Multiple vendors call the keys “licenses”, not “keys”. Commercial “license servers” (another misnomer) will show users how many “licenses” the server manages – but we have learned from the above that the server doesn’t actually manage “licenses”. The vendors should do a better job here.

My advice to ISVs who implement license enforcement is to have high clarity on this point with your customers and be disciplined in your software licensing programs. Go the extra mile to make sure your license agreements, documentation and your software itself reflect the proper terminology. Your customers and sales teams will thank you for it.

This topic fits neatly into the material I covered in the recent webinar “7 Traits of Licensing Champions”. I encourage you to view the replay and contact me directly with any questions.

Oh… and please remember to turn the light off when you leave the room.

  • chouwalker

    I work as the licensing system architect for a software vendor. We address the important distinctions outlined in this article by using the terms “license entitlement” (the RTU that the customer purchased) and “license file” (the key that enables the software). The term “license” by itself is so overloaded with meanings that we avoid using the term by itself.

  • Dave DiMillo

    Smart move! I like it.
    I’ve seen some companies remove the word “license” from the “license key/file” term as well and use terms like “activation keys”, “activation tokens”, or just “keys”. The term “token” can also be an overloaded word as it means different things to different people so be careful with that one.
    Thanks for the input.

  • Arvind Bharti

    If we look at the driving license contents it contains:
    1. Person authorized to drive (Name of the person)
    2. Vehicle class (Two wheeler/For wheeler/Heavy vehicles etc.)
    3. License validity (Date of issue and expiration date)
    4. State/Country (Place where person is allowed to drive)
    5. License No. (Unique Id)
    6. Miscellaneous information (Address of person etc.)
    If we try to correlate these information with software licensing then most of the things exists there as well.
    If we look at the definition of license, it means some kind of official permission/authorization to do something.
    A product can contain ‘N’ number of feature and each feature can have different licensing terms; means each feature has some permission attached to it and end-user can use this particular feature only when access is granted to him.
    Key can be used as a container where licenses of multiple features are stored.

  • Dave DiMillo

    Good Stuff, Arvind.
    To extend your logic out even further, I would say your car’s title is analogous to the software license, the car itself is analogous to the software product and the car keys are the software keys.
    Possessing car keys does not entitle you to ownership of the car. Ownership is defined by (and only by) the title.
    None of us confuse our car’s title and our car keys because the terminology is clear. Imagine if the car companies called the car keys “the titles”? That’s just silly. Yet for some reason, we think this is a decent idea in the software businesses.


    Your analogy of license and key fits with car’s title and car key.
    I guess Car’s title contains following details:
    Owner’s name, Number of persons allowed to sit at a time, Commercial or personal use, expiration date of RC etc. So it is some kind of license where goverment gives the ownership to the specified owner and permission to the vehicle (not the owner) to be used in a defined manner.
    And key gives the access to any person to use that particular vehicle.
    I think the confusion is because of the provisioning strategy deployed by the company.
    One option could be just ship the product to the end user and when he wants to use it, a license(file) will be provided. User will install it and will start using the product as per the licensing terms defined by the license.
    Second option could be ship the product with an activation key (or serial number). A license having the agreed licensing terms is deployed on the internet. User will enter this activation key(or serial number) to download and install the license (here license can be called as authorization key as well) on the machine and starts using the product as per the licensing terms defined by the license.
    I feel license word is very clear but key is quite generic word and most of the time used in conjuction with words like activation key, authorization key, license key etc.
    I agree that lots of confusion is there in using license/key terms but as a company consistency has to be there.