Welcome » IT Booklets » Development and Acquisition » Acquisition » Software Development Contracts and Licensing Agreements » Software Licenses - General
Software is usually licensed, not purchased. Under licensing
agreements, organizations obtain no ownership rights, even if the
organization paid to have the software developed. Rather, the
software developer licenses an organization certain rights to use
the software. Vendors typically grant license rights for a specific
time period and may require annual fees to use the software.
Vendors may also provide maintenance agreements that assure they
will provide new versions or releases of the software.
The most important licensing issue is the definition of the precise
scope of the license. Organizations should ensure that licenses
clearly state whether software usage is exclusive or not exclusive,
who or how many individuals at the organization can use the
software, and whether there are any location limitations on its
use. Before negotiating a license, organizations should accurately
assess current and future software needs and ensure the license
will meet their needs.
The license should clearly define permitted users and sites. If an
organization desires a site license for an unlimited number of
users at its facilities, it should ensure the contract expressly
provides for this. If the organization requires other related
entities to use the software, such as subsidiaries or contractors,
they should also be included in the license. Organizations should
also ensure they have an express license to retain and use backup
copies of any mission-critical software that they may need to carry
out disaster recovery or business continuity programs at remote
Organizations should clearly understand the duration of the
licenses to prevent unexpected license expirations. If an
organization desires a perpetual license to use the software, it
should ensure the contract explicitly grants such a license.
Organizations should not assume the failure to specify a fixed term
or termination date automatically provides them with a perpetual
license. At a minimum, organizations should specify in their
contract or license the time periods for a non-perpetual license
and the minimum amount of notice required for termination.