Software Licensing

What Is a Network License? How It Works

A Guide for Independent Software Vendors (ISVs)

As an Independent Software Vendor (ISV), designing a licensing model is not just a technical decision—it’s a business-critical one. Your licensing structure influences everything from customer adoption to long-term revenue predictability. Among the various options available, network licensing—particularly models like floating or concurrent licensing—can offer an effective balance of flexibility, security, and control.

This guide breaks down how network licensing works, its strategic implications, and what ISVs need to know to implement and manage it effectively.

How Network Licensing Works for ISVs

At its core, a network license allows multiple users within a defined environment to access software through a shared pool of licenses managed by a license server.

From the ISV perspective, the key mechanics are:

• A license server manages all license requests and allocations.
• When a user launches the application, the client software requests a license from the server.
• If a license is available, access is granted; if not, the request is denied or queued.
• Once the user exits the application, the license is returned to the pool.

This concurrent licensing model allows your customers to purchase fewer licenses than the total number of users, based on actual usage patterns—a valuable selling point in enterprise environments.

Key Types of Network Licenses

1. Perpetual Network Licenses

Under a perpetual license, the customer purchases the rights to use the software indefinitely, while the license server still manages concurrent access. For ISVs, this model may require long-term support commitments and a separate structure for upgrades and maintenance.

2. Floating Licenses (Concurrent Licensing)

With floating licenses, a set number of licenses can be used by any user within a network on a first-come, first-served basis. For example, a 20-seat license allows 20 users to access the software concurrently, even if the organization has 100 total users.

This approach offers maximum flexibility for your customers, particularly those with global teams, variable workloads, or shift-based user access. For ISVs, it also enables usage-based pricing and a clearer path to monetizing enterprise-scale deployments.

Strategic Benefits of Network Licensing for ISVs

1. More Scalable Monetization Models

Rather than assigning one license per user or device, a network model enables pricing strategies based on actual usage. This opens doors to tiered pricing, feature-based licensing, and usage analytics, helping you align product value with customer needs.

2. Simplified License Management

A centralized license management system reduces administrative burden for both the ISV and the client. It also improves the customer experience by simplifying installation, tracking, and compliance.

3. Enhanced Software Protection

A license server enforces access control, helping to prevent unauthorized use, enforce contract terms, and maintain compliance with industry-specific regulations. This helps you protect your intellectual property while delivering a seamless experience to authorized users.

Best Practices for ISVs Managing Network Licensing

Adopting a network licensing model requires infrastructure and policy decisions that support both technical functionality and business outcomes. Consider the following:

• Analyze usage data to understand peak demand and identify underused or overused licenses.
• Set concurrency limits based on customer environments and pricing agreements.
• Implement license server redundancy to prevent downtime or access loss during system failures.
• Provide administrative visibility to your customers so they can manage internal license allocation without external dependencies.
• Use license analytics to support renewals, expansion discussions, and product development planning.

Common Network Licensing Challenges (and ISV Considerations)

While flexible, network licenses do come with implementation and support challenges. As an ISV, anticipating these issues can help you create a better user experience and reduce support overhead.

Addressing these proactively improves the reliability and value of your licensing framework.

Conclusion: Is Network Licensing Right for Your Software?

For ISVs developing or refining a licensing strategy, network licensing provides a robust, scalable approach to access management, usage control, and revenue optimization. Whether you’re building a new product, updating your current model, or entering enterprise markets, network licensing can serve as a flexible foundation for long-term growth.

By understanding how concurrent models like floating licenses function, and implementing strong license management practices, ISVs can better align product value with client usage—while protecting IP and enabling smarter monetization.