The IT industry is in the midst of a trend of migration from local network servers to the cloud and this trend has affected license servers too. Vendors present cloud-based licensing as a highly flexible and hence desirable form of license acquisition. Using cloud license servers for cloud applications makes sense. However, using them to manage floating desktop application licenses, while beneficial to the vendor, has some serious drawbacks for the user organization. These drawbacks are the subject of this article.

Floating Licenses

Floating licenses, also referred to as ‘network’ or ‘concurrent’ licenses, are agreements in which a limited number of licenses are shared among a group of users and the number of licenses concurrently in use cannot go beyond the total number of licenses purchased. Floating licenses are normally implemented by a service or a daemon that acts as a server. The server enforces license usage restrictions as dictated by the license agreement. Floating licenses provide the user organization flexibility by granting multiple users access to a relatively small number of licenses on the basis of time-sharing.

Traditional on-premise license servers provide valuable information and functionality to the customer user organization including direct querying of license usage information, and provide valuable information about the utilization of expensive software licenses.

Vendor Preference for Named Licenses

Recently there has been  a push by vendors to move users from the traditional, floating license model to that of ‘named’ licenses, implemented by a cloud-based license manager. In this model, licenses are allocated to specific users. The applications installed on end-user workstations then communicate with cloud license servers to obtain the required licenses but the cloud-based license manager is otherwise mostly inaccessible to the client.

Less Control to the User Organization

  • While cloud license management doesn’t necessarily exclude the floating license model, most tend to skip this feature in favor of named users. The main drawbacks can be summarized as follows:
  • Migration to cloud-based named licensing models commonly involves additional expenditure. For example, clients are forced to spend money on subscription fees they may have otherwise legally chosen to avoid.
  • The customer loses much of the control they have over license allocation and is left with the decision to allocate the license to the user or not.
  • License usage reporting is more complex.
  • License monitoring and billing is left to the vendor.
  • Usage efficiency is reduced compared to floating licenses. There is a risk of licenses being allocated to named users that may not use them.
  • Clients don’t have essential information relating to license efficiency. License administrators have difficulty determining actual license levels required by each user, user group and organizational unit or preferences among users.
  • Once the move to cloud licensing has been made, it may be difficult to move to an alternative method of licensing, if and when the terms of the present license agreement change.
  • The client’s choice of using an older software version (e.g. a version to which users have become accustomed or for which they have a custom application) may be taken away. Vendors have the ability to force upgrade at their discretion.
  • The number of licenses required for purchase and the period of license subscriptions are parameters that must be determined by the customer prior to purchase. This information is no longer in their hands.
  • When a token-based approach is taken, some vendors have a policy that any unused license tokens at the end of the subscription period will be lost. This further demonstrates the need to monitor and evaluate the usage of licenses by an independent 3rd party tool.


New licensing schemas might be an opportunity for simplification, but also risk additional expenses and reduced usage efficiency. Floating licenses, when managed properly by an on-premise license manager have proved to be the most cost-effective way of using expensive software.

Before jumping at vendors’ suggestions of moving to cloud-based license management – especially if it replaces the floating model with a named one – organizations would do well to consider the points mentioned above. It might well be worth keeping to the locally managed floating license model for now and to review the current cloud solution in the future, when the disadvantages may have been resolved. Even if one vendor forces your hand, hybrid licensing is an option that can let you keep actively monitoring at least part of your license usage.

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