Comparing software licenses: open source, freeware, shareware and more

Words like open source, freeware or shareware are heard commonly, but few know what they exactly mean and what of it a company may use. Yet the difference between them decides whether you can legally deploy software at work. Let us compare the license types and explain which software suits where.

Why the license matters

A license is an agreement that says how you may use, copy, modify and distribute software. The fact that a program is free does not yet mean you may use it in a company or for a commercial purpose. This is exactly where companies most often err. Illegal use is a risk, similar to cracked software.

The main license types

Proprietary (commercial) software

Paid software whose source code is closed and whose use is restricted by a license (EULA). You buy the right to use the software, not the software itself.

• Use: according to the purchased license, in a company usually via company (volume) licenses.

Freeware

Software that is free but not open source (the source code is not public). Note, part of freeware is free only for personal use and in a company you would have to pay. Always read the terms.

• Use: free, but company use only if the license explicitly allows it.

Shareware

A “try and pay” model. You try the software for free, but for full and permanent use you need to pay. This also includes trial and demo versions.

• Use: free to try, paid for real use.

Freemium

The basic version is free, advanced features are paid. Today a very widespread model especially with online services and apps.

• Use: the basics free, companies usually pay for advanced features and more users.

Open source

Software with publicly available source code. It can be studied, modified and often freely used. In a company, open source is common and legal, but here too you need to know the license type, because open source has two big families:

• Copyleft (for example GPL). If you modify the software and distribute it further, you must also publish your modifications under the same license. For ordinary use in a company this is not a problem, it matters when distributing your own product.
• Permissive (for example MIT, Apache, BSD). Looser, the code can be used even in a closed commercial product without the obligation to publish modifications.

Many quality alternatives to paid software are open source, more in the article on free software and alternatives.

Public domain

Software completely without copyright, freely usable for anything including commercial use.

A brief comparison

What to watch for in a company

• Read the license terms. “Free” often means “free for personal use”.
• Company licenses. With paid software, handle the correct number and type of licenses (per user or per device), this relates for example to Microsoft 365 for companies.
• Open source is fine in a company, but when developing your own product, verify the license type of the libraries used.
• No illegal software. Saving via cracks does not pay off for a company.

Conclusion

Software licenses are not just a legal formality, they decide what you may legally use. Proprietary software is paid, freeware tends to be free but with restrictions, shareware is paid after a trial and open source is free, you just need to know the difference between copyleft and a permissive license. In a company it always holds: read the terms and use software legally.

Need advice on legal software and licenses for your company? Get in touch, we will help choose correctly and in line with the rules.

This article is part of our Software and system overview.