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Software Licensing Enters New Era

By Mae Kowalke, TMCnet Contributor

What might software licensing look like in the future?

The writing is pretty clearly on the wall that the democratization of software licensing models is giving organizations increasingly more flexibility around choosing and purchasing applications.

However, more choices do mean more complexity, ultimately requiring a licensing optimization strategy. Such a strategy includes processes, technology, and best practices to make sure organizations get what they need, use their purchases efficiently, and stay in compliance.

In a recent Information-Age.com article, Flexera Software’s SVP Vincent Smith explores this topic by looking at the new era of software licensing in context of the many licensing options now available, and ones that may become more prevalent in the future.

The biggest trend is a rapid phasing out of perpetual licenses for software; increasingly, there are fewer options for paying full price for software in exchange for a license that lasts forever.

This is mostly good news, since perpetual licenses involve high upfront costs and are inflexible; it’s often necessary to over-purchase to hedge against future needs, and vendors don’t offer refunds for unused licenses.

Replacing perpetual licenses are a range of new options, including:

• Subscription licensing – buyers rent software over a contracted period of time. 
• Usage-based licensing – the “pay-as-you-go” model, based on some measure of consumption
• Client/user – software is purchased based on some type of user-based metric, like number of users or devices
• Capacity/infrastructure – in this case, vendors charge for software based on the buyer’s capacity or infrastructure
• Concurrent/floating user – typically used for very expensive engineering software like CAD, charges are based on number of users with access to the system at a given time
• Company metrics – licensing cost is based on some metric of the buying company’s size, like how many employees it has
• Freemium licensing – employees access free, limited function versions of applications, and pay to upgrade to a full-function version

Enterprises stand to benefit from this expanding universe of software license options, as long as they have a strategy in place to optimize application purchases.