Product Usage and End User Licensing

This is how Wikipedia describes an End-User Agreement, typically for a software product

“Some end-user license agreements accompany shrink wrapped software that is presented to a user sometimes on paper or more usually electronically, during the installation procedure. The user has the choice of accepting or rejecting the agreement, without reading it first. The installation of the software is conditional to the user accepting the agreement and thereby agreeing to abide by its terms. Once the user has installed the software, then he/she has the opportunity to read the license agreement in detail.”

Creating an end-user agreement or contract poses challenges that go beyond that of creative legalese. One such that plagues the industry I am currently in (financial information and decision support) is that of restrictions on usage. Simply, this is where the creator-seller of the software product is trying to ensure that her revenue stream is protected by the terms of the contract and she is not giving plenty free in the way the contract is written. Consider this hypothetical example

Google wants to monetize its search business by charging users for searching. The firm has two options. One, charge for every search string the user executes. Two, charge a flat rate per license per month to access google.com. Both the options have their pros and cons. If the product is inferior (google search is not, but you get the point) option one will slow-bleed the product to death. If the product rocks, the second option will leave a lot of money on the table.

Interestingly, the second option is what in the financial information business is called “kiosking”. Under that option, the buyer can opt for Option Two above to buy one license and put it out on a public computer in the library for people to come and execute searches (yes, there will be a pretty long queue at the library but the buyer saves a lot of money). In one stroke, an annuity revenue stream has been kiosk-ed into a lump-sum license fee.

Putting the legal aspects of licensing aside, it is not trivial to find out the correct usage situations of the product to weave them in the way the commercials are structured. And it is not a bad idea to think about this as a product is being built out.

Funnily, I came across this example of a ridiculous end-user “agreement”. It prevents the user from reading aloud an e-book! Brings me to my final point. Iron-cladding the end-user license is great but please ensure your firm can audit the compliance.

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