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Will License Upgrade Models Soon Be a Thing of the Past?

By Alisen Downey, TMCnet Web Editor

If your business has ever purchased the rights to use a particular software program, you’re likely familiar with the license upgrade model. This is when a software distributor offers licensees the newest version of a product at a significantly reduced price, provided that users already own a full license for a qualifying, earlier version of the same product. For years, this software licensing model has worked, but that might be changing soon.

As Christopher Barnett of Scott & Scott LLP recently pointed out, “The increasing focus on recurring revenue and hosted software solutions, such licensing models, apparently are approaching antiquation in the eyes of many software publishers.” Rather than offering customers upgrades to existing software at a price, many companies are now looking for alternative models to ensure that customers remain loyal while still keeping the money flowing, so that users don’t seek out cheaper software solutions elsewhere.

One prime example of this movement is Autodesk (News - Alert), which announced that, beginning in February 2015, it will no longer offer stand-alone upgrades for its products. The company’s new approach is all about subscribership—or, in other words, customer retention. In order to acquire the latest versions of Autodesk’s products, licensees will now need to purchase full licenses and enroll them in the company’s license subscription program, and make sure that they stay enrolled.

Of course, Autodesk is casting this change in a positive light, stating that it is “evolving its business model to achieve a stronger and ongoing relationship with its customers, offering perpetual software licenses with Subscription and Desktop Subscriptions (software rental) as the primary purchasing options.” But what exactly does that mean for businesses using Autodesk software? As Barnett explains, this essentially means that if these companies plan to continue using Autodesk software, and if they believe they’ll need to upgrade more frequently than once every eight years or so, then enrolling their licenses in the subscription program probably makes the most financial sense.

It’s too soon to say for sure if this shift away from the software licensing upgrade model will be widespread, but for now it’s something that any business with software licenses should keep an eye on.