What is proprietary software and how does it work? (2023)

Proprietary software is software which is owned by an individual or company. It’s therefore subject to copyright laws, and only the author or owner has control over its development, just like with any other product. Producing proprietary software provides a clear business model – the owners sell their product and make money.

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What is open source software and how does it work?

If software is proprietary, it means its source code is kept secret. The source code reveals how the product works, so by concealing it, developers prevent users from tampering with the product and competitors from stealing the ideas behind the source code and using it as inspiration for their own products. Source code is a software owner’s “trade secret” if you like, and it’s essential to keep under wraps as it’s difficult to patent.

Proprietary software has existed since the 1970s, but it wasn’t always possible to create a business out of selling software. Software started out outside the laws of copyright when developers would share updates and bug fixes. Since software became subject to copyright, it has left developers and users divided between two camps: whether software should be developing using the opensource model or the proprietary model.

This complete guide takes you through all you need to know about proprietary software, including how it came about, the advantages and disadvantages and some of the most popular software packages on the market. Get up to speed in the following sections:

  • What is proprietary software?
  • Advantages of proprietary software
  • Disadvantages of proprietary software
  • Other factors to consider
  • Examples of popular proprietary software
  • Proprietary Vs other types of software
  • The history of proprietary software
  • Final thoughts & FAQ’s

What is proprietary software?

Proprietary software is software that legally remains the property of its creator, whether that’s an individual, an organisation or a company. That means they own all rights to the product, including the intellectual property rights to the source code: the code that makes the program run.

The source code is effectively the building blocks of the software. It’s the human-readable version of the software, usually written in a higher-level programming language. When developers or coders read the source code, it tells them how the software works and how they can program the computer to perform different functions.

The availability of this source code provides the fundamental difference between open source and proprietary software. With opensource software, users are allowed to inspect the source code, study it, modify it and redistribute it. With proprietary software, only the creators can see the source code, meaning it is only the creators who fully understand how it works, who can make changes to the code and distribute it on. For these reasons, proprietary software is sometimes known as closed source software.

What exclusive rights do proprietary software owners exercise?

Vendors can restrict several factors when they sell software. They exercise exclusive rights over the terms and conditions of use and redistribution. Vendors can limit the following:

  • Use of software. Vendors tend to limit the number of computers on which their software can be used. They can enforce this by using product activation, a product key or serial number or copy protection.
  • Inspection and modification of source code. In the vast majority of cases, proprietary software vendors don’t release the source code. Occasionally, they will release the source code to users who have purchased a license, but only with a non-disclosure agreement, which allows the user to study and modify the source code but not redistribute it, nor redistribute their modified versions.
  • Most vendors prohibit users from sharing the software with other entities. Each party using the software requires a unique license.
  • Compatibility with other software. Most proprietary software stores its data in specific file formats and communicates in certain protocols which are incompatible with those of other types of software.
  • Hardware use. Some licensing terms stipulate that the software may only be used on a specific set of hardware. Such is the case for Apple, which limits the macOS operating system to use on Apple hardware. This license is reinforced practically by specific design features that make it incompatible with other hardware.

Advantages of proprietary software

The proprietary model attracts a lot of developers, primarily because they get to commercialise their products. But there can be perks for proprietary software users, too. Here are some of the benefits to the closed source model, according to UI Bakery experts.


The most obvious factor where developers are concerned is that creating proprietary software means they can make money. How else do you make money being a software developer? Developing a proprietary software solution provides a logical business plan. You spend time developing a product worth buying and sell it.

Take Microsoft, for example. This tech giant has built an empire by producing copyrighted software – the bulk of its revenue comes from selling Windows and Microsoft Office. Microsoft is now worth over $1 trillion. For budding software developers, going proprietary is the obvious choice.

Product stability

As open source software is continually evolving and developing, users have no control over how it develops. For users who aren’t looking to develop or modify the software, a proprietary solution represents far more stability. If you’re going to run your entire business out of proprietary software, it’s good to be safe in the knowledge that your software solution is stable.

A clearer roadmap

Any business needs clear direction. When a developer or organisation produces commercial software, part of their business model includes a plan for the development and evolution of the product. The aim is to create a sustainable product with paid upgrades along the way. It’s far easier to establish a direction and vision for how a project will develop when it’s only you and your team who have a say.

It also means you can take your time to get there. You don’t have to race against your competitors to reach a solution before they do. With proprietary software, you are essentially working in private – you can take your time to produce a quality product without being observed by developers all around the world. You can thoroughly test your product and request feedback before you release it, giving it a better chance of succeeding once on the market.

Tailored support

For the user, paying for a product means better customer service. Closed source vendors spend significant time and money fine-tuning specific products. Typically, closed source software has fewer functions and a narrower application, meaning training and after-sale support is more complete, accessible and effective.

Not only that, but closed source vendors rely on their paying customers to make money. Therefore, it’s in their best interests to provide you with excellent customer service and support for when things go wrong. They’re on hand to help you, whether that’s in the form of an allocated technical support consultant or through a general helpline. Not only will you receive tailored support, but the response time will be significantly faster than asking for help in an open source forum.

Easier to use

Another perk for the user is improved overall user experience. Again, commercial vendors rely on you choosing their solutions over the number of free, open source alternatives on the market. User interfaces are therefore usually sleeker, and general usability is often of a higher standard in a closed source product.

Proprietary products are also typically designed for a smaller range of uses. As the focus of the software is narrower, so is the target the market. Vendors, therefore, put time and money into creating a product that aligns with expectations of their end-users.

Disadvantages of proprietary software

Some developers begrudge the proprietary model. Closed source software means that only the owner or employees of the owner can work on it, which removes the collaborative nature of open source software.

User dependency

As proprietary software is privately-owned, it means you have no control over the lifespan of the product. If you’ve based all your business operations on a piece of proprietary software and the company decides to discontinue it, there’s nothing you can do about it.

Users are at the mercy of their software suppliers in terms of updates, too, relying on them for bug fixes and improvements. If your vendor decides to take a product in a direction which doesn’t suit your company, there’s little you can do to stop them, unless you’re their number one customer. And once you’ve embedded their software in your enterprise, it can be far too costly to change it, meaning you’re pretty locked in.

Bulky products

Another disadvantage of closed source products is that they tend to be heavy on your computer system. Microsoft Office, for example, installs a lot of components that most employees don’t need, such as Publisher or Access. It can be confusing to remove programmes from your computer, or only download what you need, leading most people to blindly install a huge package. On the flip side, many open source software is rooted online and takes up only a small amount of space, which can make it a better option for some users with limited computer storage.

Less flexibility

Proprietary software is often a rigid, finished product, created for specific purposes. As such, it can be difficult to tailor the software to your particular company needs or customise the software if this isn’t already an option.

Surprise costs

Not only does proprietary software (usually) cost money, which not all open source software does, but on top of the initial costs, there may be a whole host of extra fees of which you weren’t aware at the time of purchase. As well as monthly or yearly fees, prices can increase on renewal, and there can be other hidden costs which are hard to spot when considering the initial plan.

Licensing headaches

Big companies that use proprietary software need to take care when it comes to their licensing arrangement. Working out a licensing plan with Microsoft is very different for large corporations than it is for individuals purchasing Microsoft Office. Enterprises employ experts whose entire job role is to stay on top of their firm’s licensing arrangement with the tech giants like Microsoft. Not only is it expensive to hire a person for this sole function, but if you do breach a license, you can incur significant fines.

Other factors to consider

There are a few points which are used by both camps, either side of the proprietary versus open source debate. Whether you see them as an advantage or disadvantage of proprietary software is up to you.

Better security

You’ll hear this one claimed by both proprietary software advocates and open source fans. Both sides have a point. On the one hand, when code is openly accessible, as it is with open source, it means everyone – including hackers – can easily access all of the software structure and therefore exploit any potential weak points. Closed software supporters, therefore, insist that concealed source code is more secure.

On the flip side, team-open-source argues that the collaborative development model of open source software means developers around the world are inspecting the source code all the time. As more heads are working towards the same goal, they argue that this increases the likelihood of somebody spotting problems with the code and offers a better chance of somebody being able to address potential weak points, therefore preventing exploitation by malicious hackers.

Examples of popular proprietary software

Some of the most popular software programmes on the market are proprietary. Take Microsoft Windows, revered in the computing world. This list looks at some of the most popular closed source programmes on the software scene in 2020, categorised by use.

Proprietary antivirus software

With cyber security risks on the rise, any computer user ought to invest in some antivirus software. Some of the best packages available are proprietary licensed products.


Norton is the leading software developer when it comes to antivirus solutions. It’s a pioneer in antivirus protection and cyber security, having over 50 million users across 150 countries. It’s rated the number one best antivirus software of 2020, having won several awards from online testing laboratories including AV-Test and the Anti-Malware Testing Standard Organisation.

Benefits include cloud backups and storage, high-accuracy virus detection without false flags, identity theft prevention and the option to manage all your devices in one online portal.


Another top-rated antivirus software is Bitdefender. This software provides excellent virus protection without being heavy on your computer. Other features include safety when chatting online in popular social networks, highly rated virus detection and a function which protects mobiles from physical theft. It scans networks quickly and also operates through a VPN. To top it off, Bitdefender offers a basic free version with some impressive features.


One of the most flexible closed source antivirus software is McAfee. Not only can you resolve security issues remotely on PCs, but you can protect any number of devices with the software. They also have a money-back guarantee – if they don’t remove all your malware, you’ll get a refund. It’s also a good option for keeping your documents safe, storing them all in an encrypted folder.

Proprietary password software

In the same vein as antivirus protection is password management. Poor cyber security practises include poor password habits – whether that’s using the same password for everything, sharing all your passwords with your colleagues in an open document, or leaving sticky notes lying around the office. Password management software can generate secure passwords for you and save them in a safe, encrypted place, providing the right access to the right people.

Keeper Password Manager & Digital Vault

One of the best password manager software solutions is Keeper. It’s a flexible product, supporting all the most popular browsers and platforms. This software lets you securely share passwords with other people and colleagues. It retains a full history of passwords and files, with secure file storage options and the option to message securely, using two-factor authentication. It’s a multi-award winner, winning four InfoSec awards at the 2020 RSA Conference, owing to its elegant user interface and range of top quality features.


Another popular password manager is LastPass. They offer a free version as well as a premium version at an affordable price. Both versions will store all your passwords securely across all of your devices, but premium features involve priority customer support, 1GB of secure online file storage and enhanced multifactor authentication options. It works on a range of platforms and operating systems, including Windows, macOS, Android and iOS devices, allowing you to sync passwords between them, too. Its user interface has recently had a makeover, now offering some advanced features.

Closed source asset management software

If you’re a business with assets, you will need a way of tracking them. Asset management software allows you to monitor your assets from the moment you procure them to the point you dispose of them. The software lets you see the location, maintenance schedule, usage and depreciation of your assets all in one place, which helps you measure their efficiency. By closely monitoring their output against the money and time you spend on them, you can decide whether they are worth keeping and at what point to sell them on.


Provided by WaspBarcode, this package makes it easy to implement a comprehensive asset management system in your company. Its one of the most extensive software packages on the market, allowing you to track equipment, IT assets and awarded funds. AssetCloud has a particularly user-friendly interface, allowing you to centralise all your user accounts and security settings in one place. An efficient barcode asset tracking system removes the need for time-consuming manual tracking, and the reports function allows you to generate or build a report using visual data.


Another proprietary software for asset tracking is AssetManage, by Liberty Street Software. It’s suitable for any sized company, allowing businesses to keep records of their fixed assets in one place. It’s one of the cheaper options available, and they offer a free trial so that you can try before you buy. Features include audit management, cost tracking, inventory management and supplier management.

Proprietary remote working software

Today’s working professionals are turning to remote working more and more. This leaning towards working from home received an enormous push from the Covid-19 pandemic, forcing even the most reluctant companies to take their businesses remote. The most effective remote working software packages are closed source.


Suitable for business users and individuals alike, this popular remote access software uses cloud technology to offer a slick remote access solution. It can be used as a mobile app or through an intuitive web application, integrating collaboration features such as voice chat. It’s suitable for a large number of users and devices, making it easily scalable for larger companies. You can try it for 30 days for free before you pay.


One of the most competitively priced software packages for remote desktop access is ZohoAssist. It boasts an impressive array of features, including video and voice chat as well as screen annotation for collaborative work. You can access almost any device through the software offering maximum efficiency. They have a tiered range of products available, from standard through to enterprise level. It’s a particularly good choice for anybody working with sensitive data, as it offers fantastic security integration options.

Proprietary business tools software

There’s a whole host of software available to help companies streamline almost every aspect of their business. Document management software (DMS) enables colleagues to share files easily, managers to grant access to the right people and businesses generally to store and organise documents effectively. CRM or customer relationship management software helps companies manage customer relationships by sharing customer accounts amongst employees and enabling communication with partners.

Project management software helps streamline the project planning process and allows managers to better oversee a project. Accounting software can help businesses manage their finances, and Point of Sale (POS) software takes care of your sales, communicating simultaneously with your stock levels. A lot of these software solutions can automate processes otherwise done manually, improving a firm’s overall productivity.


One of the best document management tools out there is Templafy. It integrates seamlessly with a company’s office suite, including Microsoft Office, SharePoint, One Drive and Google Drive, and allows you to create a range of files and documents with your firm’s branding. Its cloud technology will enable users to access documents from their smartphone, tablet or computer. Other benefits include automated compliance checks, compatibility across a range of devices and a customisable interface.


For streamlined customer relations management, Insightly is ideal for small and mid-sized businesses. It has over 1.5 million users and boasts helpful features to help with workflow automation, call management, lead management, relationship linking and generating quotes. It also offers a mobile CRM app as well as Gmail and Outlook plugins.


LiquidPlanner is a comprehensive project management software tool offering dynamic features. It’s simple to use, with an intuitive and responsive site with drag-and-drop functions. You can manage tasks, workers, time and resources all in one place, and it is widely considered to be one of the best project management apps available. Its only drawbacks are that it’s one of the more expensive packages available, and it can take a lot of time to learn the ropes.


This user-friendly Point of Sales software package from Shopify offers a flexible solution which can be adapted and customised for a vast range of businesses. It has a broad array of features and integrates with hardware such as a barcode scanner and printer. It offers an intuitive interface for apps such as Android, iOS and on the web. You can track your stock levels, view current orders and deal with customer service requests, all in one place.

Proprietary Vs opensource and other types of software

The differences between opensource, proprietary and other types of software can be subtle. The differences depend principally on the type of license attached, which can mean that open software can be relicensed to become proprietary, and vice versa.

Open source and free license software

If a piece of software is open source, it comes with an open source license which grants the user the right to use the product as they see fit. This license removes all the usual restrictions which come with copyright law, and are therefore sometimes referred to as copyleft licenses. The freedom for users granted by this license covers a range of things, primarily grouped into three categories.

  • Firstly, users may simply want to inspect the source code, to use it as a learning resource for understanding how source code and software works, and to learn how to code.
  • Secondly, they might want to modify the source code, whether that’s as a learning exercise or because they want the software to serve a slightly different purpose. The users are allowed to replicate the source code and add additional functions, remove certain features, or change it altogether.
  • Finally, they might want to redistribute the software whether that’s as it is, with their modifications or, sometimes, as a paid product.

The terms free license software and open source software often appear interchangeably to refer to the same licenses and, usually, software. The difference is nuanced and refers to a slightly different approach or philosophy to building software. To put an end to the discrepancy over what is a negligible difference, you might see the term FOSS (free and open-source software), created to cover all bases. You can find more on this in the history of proprietary software.

Where open source and free license software intersect with proprietary software is in the license attached to the free license software. This intersection mostly affects the rules around the distribution of modified open source software. The open source licenses include:

  • MIT license: this one, as you may have guessed, began at MIT. It grants the user permission to inspect and modify the original code. It also allows users to make modifications and then relicense their changed software as a new product, under a proprietary license. As such, an MIT license differs from copyleft software licenses.
  • GNU General Public License (GPL): this license stipulates that any modifications, developments or new software created from the source code must remain open source. Anything originating from a GPL license must stay that way, meaning any GPL software stays in the public domain forever.
  • Common Development and Distribution license 1.0 (CDDL-1.0): Similar to the GPL, any CDDL licensed software must remain that way forever, in all its derivative forms. Users can still inspect, modify and redistribute the code, but you can never relicense it as proprietary software.
  • Apache License 2.0: This one is mostly the same as the MIT license, but you have to be more careful about stating when and how you have modified the code. You can still freely use the code, make changes to it, and share the software on, but you must attach an explicit statement to any derivative code stating that you modified it before you redistribute it.
  • BSD license: a BSD license offers more or less freedom, depending on how you look at it. A BSD license means the software is open for users to see the source code, play about with it and redistribute it. The users are also free to manipulate the software source code and keep it to themselves and relicense the new product as proprietary software, through a commercial license.

Where the Apache, BSD and MIT license stand out, is the possibility for relicensing into proprietary products. They are all permissive licenses but aren’t copyleft licenses as they do allow for sub-licensing. As such, open software licensed initially under either of these three licenses may eventually evolve into a product that the developer than relicenses as proprietary software.


Freeware refers to software that you can use, as the name suggests, free of charge. Freeware applies solely to the price and not the rights afforded to the user. More often than not, users cannot access the source code, make any modifications or redistribute it without express permission from the author – meaning that a lot of freeware is proprietary software. The most common types are Skype and Adobe Reader.

The history of proprietary software

Where did proprietary software come from? When software was in its infancy in the 1960s, computers were unrecognisable from what they are today. They were huge machines that took up an entire room, which had to be specially cooled. The computers were used primarily for bulk data processing, and as they were so expensive, were often leased to corporate customers rather than sold. All software installed on the computers were supplied by the manufacturers, too, and they provided the source code.

Customers who developed software on these computers would pass the software on to others free of charge. This practice was the norm, particularly in research centres and universities, so that students and researchers could fix bugs or add new functions. It wasn’t until 1974, when the U.S. Commission on New Technological Uses of Copyrighted Works (CONTU) declared that computer programs were the intellectual property of their authors, that software gained the same status as literary works, subjecting them to the same copyright laws.

This status paved the way for the closed source software business model and kicked off software licensing. Software moved away from the collaborative development model, and it became routine in the late 1970s and early 1980s to charge for software licenses.

In the early 1980s, some developers wanted to preserve the freedom and collaboration associated with early software development. To return to this model, Richard Stallman set up the GNU Project in 1983 to keep software free. He invented copyleft, producing the GNU General Public License which removed all the copyright restrictions. This return to an open model eventually led on to the open source software movement to protect peer development.

Why is proprietary software so divisive?

These two very different development models have left software developers divided. It’s a philosophical debate over than anything else, with open source supporters insisting that the open source philosophy fosters transparency and collaboration amongst developers, promoting faster technological advancement and innovation. For open source fans, the principle is that the entire community, including non-programmers, benefits from developments and progress, which will encourage better software for everyone.

But for the business-minded, open source software simply doesn’t make sense. If you pour time, money and energy into creating a product, then it should be yours to profit from. Proprietary defenders argue that the best way to drive innovation is to make it lucrative, by attaching revenue to progress. Creating a business out of a product ensures that the developers commit to improving the product for their paying end-users.

Final thoughts & FAQ’s

Proprietary software might be a more expensive option, but it’s one that could save you money, time and resources down the line. These products are professional-grade and designed with the end-user – that’s you! – in mind.

That said, it’s worth weighing up the pros and cons of closed source software before you reach a decision. Do a little market research, and see what open source software alternatives are available, and how much technical skill you would need to implement and maintain it. Ultimately, it’s a choice between reliability and stability against adaptability and flexibility. If you’re looking for a readymade solution for straightforward uses, then consider going with proprietary software, which comes up trumps for usability and customer service. Find answers to frequently asked questions on proprietary software, below.

Is proprietary software the same as commercial software?

These two terms are often used interchangeably and are often synonymous. Commercial software, occasionally known as payware, is computer software specifically produce for sale or commercial purposes. As most proprietary software is sold or created for this purpose, there’s a lot of crossover. However, not all commercial software is proprietary – some remains open source, although this is far less common.

What happens when proprietary software is abandoned?

One of the significant drawbacks of proprietary software is that once the copyright holders stop manufacturing it, it can disappear into the abyss. This type of software is known as ‘abandonware’, the digital version of ‘orphaned works’. For businesses, abandonware is one of the risks of relying on proprietary software – if your operations are based on a programme which discontinues, you’re in for an expensive switchover.

Although it’s no longer being made, abandoned software will stick around for as long as computer operating systems support it. Companies can, therefore, continue to use it if it works on their system, but there won’t be any technical support available for problems, troubleshooting or bug fixing.

For individuals, abandoned software can be frustrating. Particularly in the gamer community, a lot of old favourites fall by the wayside – this was the case for several milestones in video game history, such as Asteroids, whose source code was discarded when Atari closed in 1996.

Abandonware is a grey area when it comes to copyright. Many users want to keep the software alive and stop it dying out with the physical media it’s tied to, as was the case for many software programmes designed for floppy discs. But adapting software to modern computing systems would infringe copyright laws. Many users take the risk, as they believe many manufacturers may no longer be interested in tracking copyright violations. While this may be the case, it’s important to note that copyright infringement of any kind is illegal. Many fans have called to move old proprietary software under open source licenses, but this hasn’t had any success.

What is a shrink-wrap license?

A shrink-wrap license is a form of end-user license agreement (EULA). It comes with software when it’s enclosed in plastic-wrapped packaging and dictates the type of license the user holds and what they can and cannot do with the software. A shrink-wrap agreement is deemed to come into effect once the end-user opens the packaging. This kind of arrangement is controversial, as it means users can’t see the agreement before they’ve purchased it.

To resolve this problem, some manufacturers use an onscreen EULA instead. The user must agree to the user agreement on the screen before they can continue with the installation. A EULA of this kind is sometimes known as a clickwrap agreement.

Do governments use proprietary software?

The opacity of proprietary software means that some governments fear trusting software which could compromise sensitive information if they included malicious elements or defects. In 2003, Microsoft launched a Government Security Program, where governments were allowed to view the source code as well as Microsoft’s security documentation, intended to address the increased security requirements for government bodies. One of the first governments to come on board with the program was the Chinese government in 2003, after meeting with Bill Gates. Now over 45 governments participate in the scheme.

What is shareware?

Shareware refers to proprietary software which is available to users for free under certain conditions. Software owners who distribute shareware often also have a commercial version of the same product, in which case the shareware would have limited functions compared with the paid version. Other shareware might represent the full paid product, but has a very limited period of use, as is the case with many free trials. The idea behind shareware is to give users a chance to test out the product before they invest in a license.

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