Monday, January 22, 2007

A Brief History of Software License Management

The Early Years (1988-1992)

When I talk of Software License Management, I am thinking of Network Licensing or Concurrent Use Licensing. The kind of license management made popular by FLEXlm(R) from GLOBEtrotter Software. (Note: FLEXlm is now a registered trademark of Macrovision Corp. following their acquisition of GLOBEtrotter in 2000.) And of course, everything contained in this document is my view and opinion of the history of license management.

Having said that, let's begin.

Floating Licensing became popular in the late 1980's, as networks of engineering workstations came into widespread usage. To understand why it became popular, we only really need to understand what it replaced.

In the early 1980's the number one method of software licensing was "do nothing and hope for the best." In addition, on PCs, a number of copy-protection technologies were popular (I say popular in the sense that they were used a great deal, not that people loved using them.) On engineering workstations, software was often "node-locked" so that it would run on only one computer, usually identified by a machine serial number (or "host ID") which was an integral part of the workstation.

The story of floating licensing begins in the Engineering workstation world, where software licenses would often cost upwards of $50,000 each. (Today that number can be well over $1,000,000 per license.) These higher-priced packages were the ones most likely to be node-locked, and at the same time, corporations were not willing to buy a license for each designer's workstation, especially if only a few would be in use at any one time.

As more and more packages employed node-locking, the users of the software grew tired of having to move to a particular machine in order to do their work. This was the environment into which the first two commercial license managers - "Network License Server" from Apollo Computer (1987), and "FLEXlm" from Highland Software/GLOBEtrotter Software (1988), were born. (Note: The Frame license manager, used by the popular Framemaker publishing software was also developed around this time. Many people thought Framemaker used FLEXlm, but in fact it was their own proprietary license manager.)

Once commercial license managers were available, end-users were able to share licenses on their networks without the inconvenience of moving to a different physical location. At the same time, Independent Software Vendors (ISVs) were able to charge different amounts for a node-locked, as opposed to a floating license. Since the floating license provided more capability than a node-locked license, many ISVs charged a bit more for the floating license. End-users benefited by being able to purchase the lower-priced node-locked licenses for people who used a product intensively, and the more expensive floating licenses could be shared by several people who used the product occasionally. In this way, both ISVs and end-users benefited from this new licensing technology.

In the early days (let's say 1988-1990), there was quite a bit of end-user dissatisfaction with license management. This was due to the fact that it imposed management overhead without much benefit to the people who had to manage it. The actual software users and corporations benefited from ease of use and more effective software utilization, but the system administrators who had a new technology to manage were not terribly happy. This began to change as it became clear that most ISVs were standardizing on FLEXlm (so that the sys admins only had to learn one system) and as FLEXlm added management capabilities which not only made management easier but provided new capabilities to control access to the software and report on software usage after the fact.

I'll leave this off here, around 1991-1992. At this time, license management was still largely used on Unix and VMS systems, as networking was still very fragmented in the PC world. With 20 or 30 different TCP/IP vendors and Novell, there was no clear universal standard for PCs like TCP/IP for Unix and DECnet for VMS.


Anonymous said...

I am not a true historian but I found the article too brief. The fact is that almost all software license managemnet products are VERY WEAK. Just look at the web site where one can download hundreds of products by paying almost nothing. $25 is a common price for a system that is "selling" for thousands. Software licensing needs some teeth - strong software licensing technology is known but not being used.

Matt Christiano said...

Stay tuned, there's more coming.

What you say is quite correct - license management systems were not, and are not, copy protection. The key phrase is "keeping honest users honest".

The real issue facing an ISV is not whether people (or companies) can steal your software, the issue is increasing revenue.

My belief is that companies who are going to buy software will do so when and if they know they are over their license limits. If they don't know they are over-using an ISV's software package, they won't buy more. If they do, they will plan, budget, and purchase more.

The question is, does an ISV lose much revenue from companies or individuals who use cracked copies of their software? I believe the answer, for enterprise software, is no. (by the way, enterprise software ISVs are the majority of license management customers).

Vic DeMarines said...

I agree Matt that license management and software (or copy) protection functions are different. License systems are required to manage and monitor license use within a legit customer site. Software protection is specialized to defend applications against reverse engineering that enables overt piracy. The only area where these functions overlap is defending against unauthorized key generators. I believe Reprise and Macrovision have technology based on Public Key Cryptography standards to combat this. Software protection is needed on top of license management to guard against all the other trivial binary patch methods that the cracker employs to bypass licensing altogether.

From a revenue perspective however, there is definitely money being lost. One MCAD vendor we talked to indicated $30m in revenue was lost to piracy. This was an internal estimate not one based on the macro BSA findings. I believe that the manufacturing growth and increased tech education within emerging countries contribute to these losses. Even complicated software can be installed illegally and serviced in these countries without the vendors involved.

Avinash Dwivedi said...

I appreciate your hard work that is making this blog informative in the License Management Software.
Thanks for sharing a informative blog.
Software Asset Management Best Practices