A flexible software license model that is gaining some traction in the market is a token software license model. This model is very effective for software vendors who have a wide portfolio of software, where the usage patterns of individual software are difficult to predict. This situation often occurs in technical markets, where the portfolio of software is used in a design flow or to conduct a software experiment.
Benefits of a Token Software License Model
Users may not be able to predict how much software to purchase at the beginning of the purchase cycle as the usage of software may be dependent upon the challenges faces in a particular design. For example, in electronic design, a particular design may require more simulation software than previous designs have required.
From the perspective of the software vendor, it’s also an effective way to fortress a market position against point-tool competitors. The token software license model makes it financially easy for the customer to utilize the entire portfolio of software, and not try to buy the best-of-breed for every part of a design flow.
Different Types of Token Software License Models
Expiring Concurrent Tokens
The simplest form of token software license model is implemented (and easiest described) as a variant of a floating license model. With the typical floating license model, each time a particular software product or title is run, it checks out a license key from a license server for the duration of operation.
For example, “Software A” will request a particular license key associated with “Software A” from a license server whenever it runs. If the license server has licenses available, the software is granted a license to run. The software will return the license to the server when the software is exited. Similarly, “Software B” will request a particular license key associated with “Software B” from the license server whenever it runs.
When deployed as a token license, the software vendor creates a generic license key “token” instead of a license key associated with each product – the idea being that products don’t check out product-specific licenses, but rather, check out one or more generic tokens – the amount of which is weighed toward the list price of the product. With this software licensing model, the customer downloads the software for a portfolio of software, and then purchases a number of tokens that enable the software.
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For example, let’s say I download the software for Product A and Product B, and buy 4 tokens. The way the tokens have been designed, “Product A” checks out 3 tokens when it runs (and returns the tokens when they are done), whereas “Product B” may check out 2 tokens when it runs (and then return them when they are done).
With 4 tokens, I can concurrently run 1 copy of Product A (with 1 token unused), or 2 copies of Product B. However, if I purchase, say, 6 tokens, I could concurrently run 2 copies of Product A, 3 copies of Product B, or 1 copy of Product A, and 1 copy of Product B (with 1 token unused).
Tokens are typically implemented as a subscription license, which expires at the end of a term, such as a year. This provides the software vendor with some revenue upside as a result of offering this increased flexibility.
Consumptive Tokens
A pure-play consumptive token, like a gumball machine, is a “use it up” model. In this model, when Product A runs, it checks out 3 tokens, which are then consumed and then no longer available. This type of software license model applies best when licensing software that is transaction-oriented, and the software vendor wants to charge based upon the total number of transactions. We have seen this license model in the medical equipment market, where a specific number of “treatments” is allowed for a fixed price.
Common Questions
What is a token software license model, and why is it gaining traction?
A token software license model is a flexible licensing approach that allows customers to purchase a pool of generic tokens instead of product-specific licenses. These tokens can be used across a vendor’s entire software portfolio, making it easier for customers to access multiple products without predicting exact usage needs upfront. This model is particularly effective in technical markets where usage patterns vary, such as electronic design, and helps vendors strengthen their market position against point-tool competitors.
How does the expiring concurrent token model work?
The expiring concurrent token model functions like a floating license system but uses generic tokens instead of product-specific keys. Each product checks out a certain number of tokens based on its value when it runs and returns them when the session ends.
What is a consumptive token model, and when is it used?
A consumptive token model operates on a “use it up” basis, similar to a gumball machine. When a product runs, it consumes tokens permanently rather than returning them. This model is best suited for transaction-oriented software where vendors charge based on the number of transactions or treatments.
