Existing software license validation methods used by software publishers

Software license management (SLM) ensures that the software licenses in use are valid, to prevent the free use of proprietary software. It is a proactive practice aimed at preventing or minimizing software copyright violations both at an organization level and for a common user. License validation is a prerequisite for software installation.
The common ways to distribute licenses are:

• License key – The full packaged software is on an installation media (floppy, CD / DVD), with a unique hard copy license key used to activate and install the software.
• Online license – Online validation ensures that the same key is not used for multiple installations or that no illegal keys are used. The license key is validated against a database that keeps a ledger of all the licenses sold.
• Hardware license – Hardware license validation uses a combination of the license key and the host machine manufacturer’s hardware serial number hashed into a unique record.
• Usage-based license – For large enterprise buyers, some of the independent software vendors (ISVs) provide a blanket license, that allows enterprises to use the software as they want to and then report the usage to ISVs for billing purposes.
  Usage Based Licensing is an on-demand licensing model that charges for an application based on usage metric that is ascertained by enabling the application with analytics. This method works with both on-premises and Cloud-based applications and can work with permanent and temporary licenses.
  Billing is usually based on the number of hours of usage of the application, the number of times it is launched, or other application-specific metrics such as the number of jobs run, format conversions processed, etc. For example, an accounting software could charge for each yearly report created or a movie editing software could charge for each movie created or (format) converted. The such billing software allows a larger group of people to use the software. Usage-based licensing can be used as an alternative to floating licenses, or to cover temporary increases in render nodes for situations such as cloud burst compute, rentals, artist machines overnight, etc. Blockchain makes it easy for creating, managing, and storing licenses and licensing information in usage-based licensing.
• Cloud license management- Cloud software licensing management involves managing and storing software licenses in the cloud. It provides benefits such as:
  – Ability to provide customizable cloud software license management
  – Opportunity to provide software easily and quickly
  – Better control over their licenses, their analytics, and more in turn leads to greater revenue and customer satisfaction. Enables software sellers to add subscription models to their roster of services.

Software license – validation methods and audits

Software license validation methods serve as control measures to ensure that software publishers are compensated. Software license audits are a reactive practice aimed at rectifying situations of non-compliance. It provides greater control and cost savings while ensuring efficiency in software distribution besides being a preventative mechanism for copyright infringement.

The global software asset management market size is expected to grow at a Compound Annual Growth Rate (CAGR) of 18.1%, from USD 2.0 billion in 2021 to reach USD 4.8 billion by 2026. (Source)

Software License Management (SLM)

Managing software licenses follows a pre-defined and widely used set of procedures. The process involves:

• Defining business policy and procedures for acquiring, using, and renewing software licenses.
• Setting up internal controls that comply with business policies regarding software license compliance.
  
• Conducting Internal Audits on software licensing to identify potential areas where users might have violated the contract or legal agreement.
  
• Deploying SLM Software to manage the licenses and maintain compliance.
  
• Educating employees about SLM policies and software compliances.
  
• Periodic reviews and updates to keep track of renewal dates, upcoming updates, requirements, or removals.
• Monitoring usage to ensure compliance and identify the overuse or non-compliance of any software or subscription.

The process of software license management includes a few steps such as:

• Software inventory building.
  
• Using the license management software to maintain the expiry details, invoice, warranty, and other important details.
  
• Grouping different editions/versions of software.
  
• Configuring alerts when a particular software is under-licensed or over-licensed, using a license management system.
• Tracking software usage with the software metering tool.

Why Blockchain in Software License Management (SLM)

Implementing a Blockchain system for software license management can improve the traceability of software licenses throughout their lifecycle- from purchase to allocation, to decommission. The ledger is updated based on the transactions on Blockchain, to provide a real-time view of available assets and the distribution of used assets. The system can also help to map the systems that use specific software or even functionalities within it.

Benefits of implementing a blockchain-driven license validation and management

Blockchain is an excellent tool for creating, managing and storing licenses and licensing information. Its decentralized data storage and peer-to-peer computing network help implement any logic in smart contracts. The four most important benefits of Blockchain technology are:

• Decentralization – There is no single central server managed by one person or group of people, hence reporting of license usage is immutable and trustworthy.
• Transparency – All operations are open and visible to the participants of the network e.g., the ISVs, SW user organization, SW resellers, etc.
• Sustainability – A complete copy of all data is stored immediately by numerous network members, so even if one of the instances is down the system still functions.
• Security – All data on the network as well as all ongoing transactions are secured with asymmetric encryption

Elements of Blockchain relevant for SLM

Blockchain becomes relevant for SLM with its log of transactions where information is stored in a distributed, decentralized manner and is accessible to everyone.

What does Blockchain do – Role of blockchain in licensing software

Blockchains are a natural fit for storing the sale and terms of routine licenses such as producing and distributing e-books and self-executing contracts that could include (or exclude) resale of the rights. Blockchain licensing enables trust, regulation, and monitoring while deciding which transactions are to be recorded. Blockchain can provide access to the public about updates in the reversal of rights back to a creator, or transfer to a new agent, or other recorded rights.

Blockchain implementation/operational aspects as a solution for SLM

A Blockchain system for SLM can prevent the installation of software when no licenses are available, thus preventing over-utilization. Some of the other operational features of Blockchain in SLM are:

• Distributed real-time database
  
• Eliminates central broker or named trusted party
  
• Verifiable by any participant
  
• Resistant to unwanted modification
  
• Contains executable code based on defined conditions (smart contracts)Implements software licensing concepts using unit counters

Technology Challenges

Blockchains are unlikely to be of much use in mitigating ordinary infringements in software licensing. There could also be difficulties with the areas of custom licensing and scalability. Work needs to be done on blockchain technology and to establish a trusted link between the blockchain and established infrastructures and data sources.
Getting software usage data from the organizations is a difficulty as most of the organizations are operating their servers behind a firewall and usually their security practices do not allow software metering clients on their servers to send out data.

Asset Management enhanced with Blockchain

Blockchain can reduce costs, increase operational efficiency, improve transparency, and facilitate a range of innovative possibilities such as:

• Creating a system consisting of the technology and processes of third-party providers and internal systems, revolving around a single source of truth for the asset management activities.
• Creating an accurate, unchangeable record for asset managers to verify the transactions
• Assuring consistent records.

Blockchain for enhanced asset management – One of the major solutions in this space is designed to provide industry-leading asset management capabilities. Traditionally, asset-related transactions are shared across a business network using interfaces between different systems of each party involved. Third parties carrying out work on a customer’s assets often use systems that are isolated. In some industries, regulators are looking for customers to proactively demonstrate compliance. It helps mitigate the challenge of communicating with multiple parties on connected systems.

More than 30% of software on machines tested worldwide was unlicensed according to 2021-22 statistics. (Source)

Use cases and examples

Blockchain typically finds uses in License management in these areas:

• Media rights management
  • Digimarc is integrating blockchain into its technology to help license music through its Digimarc Barcode for Audio. It gives audio files a unique, indelible identifier while allowing listeners to engage and interact with additional information. Digimarc Barcode makes it easy for music to be properly credited.
  • Mediachain Lab uses blockchain technology to link media content to its respective authors.
• Software & Hardware asset management
  • The Secure Product Identity from Chronicled, provisions physical products with a secure cryptographic identity for smart phone and machine interaction. Chronicled has trialed the technology to detect counterfeit goods, interactive shopping, and drone delivery
  • Accenture uses Blockchain technology to track all software license events during their lifecycle.

Chainyard in Blockchain and SLM

Chainyard’s certified team brings extensive experience to architect, build, test, secure and operate solutions that help blockchain adopters succeed.
The solutions include:

• Consulting
• Engineering
• Operations
• Consortium Building

Chainyard’s blockchain consulting team uses a growing set of solution accelerators. The accelerators provide:

• Secure and resilient off-chain document management
• Configurable state tracking engine for physical and virtual assets
• Framework for self-managed identity
• Interfaces to common enterprise messaging systems
• Project kicker tool
• Block Chain Network Engineering (BCNE) tools to accelerate deployment of blockchain applications