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Pym's Technology Lawyers
Pym's Technology Lawyers

Licence Rights & Pricing

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The primary purpose of a software licence is to precisely describe the rights that the customer will have to copy and use the software product.  The more precisely these rights are described the more likely it is that the supplier will be able to obtain additional licence fees if the customer's use of the software exceeds the rights that the customer has been granted.

There are a number of ways that software suppliers price their software.  Common ways of pricing include "per CPU", by the capacity of the machine on which the software is installed, per "named user", per "concurrent user", "per employee" (common in payroll applications, for example), for a particular project or usage, or for a specified period of time.  Having said that, there is nothing wrong with pricing the software on any other basis and we have seen suppliers price software on the basis of "per oil rig" or on the basis of transactions, either number of transactions or the value of transactions that have been processed through the software. 

The key thing is to price the software product in a way that reflects the customer's perception of the value of the software, is easy to understand, and is auditable.

Software can either be licensed on a perpetual basis, typically with an up-front fee, or on a periodic (or term) basis over a specified period.  In this case it is common for payments to be made periodically, either annually, quarterly or monthly, in advance.  Often with periodic licences the price of support and maintenance is bundled into the price of the software licence giving the customer a combined fee for both software licence and support.

Another key consideration in software licensing is whether the software is going to be installed on the customer's hardware or whether the software is going to be installed on the supplier's hardware (or a third party hoster) and access to the software is provided to customers.  This type of arrangement is often called providing "software as a service".

One of the most important parts of a software licence agreement is to specifically define the rights of usage.  This includes defining terms such as "named user" and "concurrent user". 

For example, if the software was priced on the basis of a "named user" does a "named user" mean an individual who is an employee of the customer, or does it mean an individual who is an employee or contractor of the customer, or is it broader and means both an individual who is a "named user" who is an employee or contractor and also any generic login? 

For example, consider an email program; if the definition of "named user" included all logins, then email addresses such as info@pyms.com.au would also be included in the definition of "named user".  These issues can have a significant impact on the actual price paid by the customer.

Next: how licencing impacts your Booking of Revenue.

 
 
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Which contract is best for me?


Clicking on the link to one of the specific online Contract Templates listed on this page will give you a description of when that particular contract should be used, and help you decide if it is the right document for your needs. 

You should choose the online Contract Template that most closely describes the way you provide your software licences and support to the customer.


 
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