What is a digital software licence? A buyer's guide

A digital licence is permission to use software, recorded and delivered electronically rather than printed on a certificate or tied to a disc. Buying one gets you an entitlement — a right to run the software under stated conditions — and the means to activate it.

It is the same thing as a "digital license"; the spelling differs, the entitlement does not.

What you actually receive

Three things, and it is worth knowing which is which:

- The entitlement. The right to use the software, held against your organisation in the publisher's records. This is the part that matters. - The activation mechanism. A product key, a sign-in, or an assignment to a user account, depending on the publisher and the programme. - Proof of purchase. Your invoice, and the record in the publisher's own portal.

A licence is not the download. The installer is freely available for most software; what you buy is permission to run it.

Perpetual, subscription and the difference that matters

A perpetual licence is bought once and does not expire. A subscription licence runs for a term — usually a month or a year — and stops when it stops being paid for.

The practical difference is not price, it is what happens when you stop paying. A perpetual licence keeps working at the version you bought; a subscription does not keep working at all. Whether that risk is worth the lower entry cost depends on how long you will use the software and whether you would have upgraded anyway.

Assigned to a person or to a device

Publishers have moved steadily towards named-user licensing, where an entitlement is assigned to one person and follows them across the machines they use. Device licensing, where the entitlement belongs to a computer and anyone using it is covered, still exists in some programmes.

Which one you have determines the question you have to answer at audit: how many people use this, or how many machines is it installed on. Those give very different numbers in an organisation with shift work or shared workstations.

Why the paperwork is the product

A digital licence has nothing physical to point at, so the records are the asset. Keep the invoice, keep the account the entitlement was assigned to, and keep them somewhere that survives the person who bought it leaving.

Two things follow from that:

- Transfers are not automatic. Whether an entitlement can move to another organisation, or between named users, is set by the publisher's terms for that programme. Check before you assume. - A key found online is not a licence. Marketplaces sell keys that activate and are not entitlements — often volume or OEM keys sold outside their terms. They activate today and fail an audit, and the buyer carries that, not the seller.

What to check before you buy

- Which programme the licence is being sold under, and whether that programme permits sale to you. - Whether the term is perpetual or subscription, and what the renewal price is rather than the first-year price. - Whether it is assigned to a user or a device. - What you receive as proof, and whether the entitlement appears in your own publisher portal afterwards.

The last one is the useful test. An entitlement you can see in your own tenant or account is one you demonstrably hold. Anything else is somebody's assurance that you do.