Impact of Software Licenses in Cloud Computing Based E-Governance Initiatives Software licensing requires understanding of hardware architecture as they do depend upon number of physical processors and core and look into vendor specifications to find about factors to use and then perform lot of calculations to get the correct sizing for a software product. This task need to be performed very carefully otherwise organization may have to pay software related penalties. Software licensing in cloud computing model can be much simpler, however, if not handled properly it can be even worse. Some software vendors are innovating and offering “pay as you go” model in the cloudenvironment, where as some customers pay based on utilization-per hour, per day or even per user-others still don’t have policies to make their software cloud-friendly. Cloud computing represents a major shift in information systems architecture, combining both new deployment models and new business models. Rapid provisioning, elastic scaling, and metered usage are essential characteristics of cloud services, and they require cloud resources with these same characteristics. When cloudservices depend on commercial software, the licenses for that software become another resource to be managed by the cloud. This paper examines common licensing models, and how well they function in acloud services model. This discusses creative, new, cloud-centric licensing models and how they allow providers to preserve and expand their revenue streams as their partners and customers transition to the cloud.