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Software Licensing Models: Change is a Good Thing

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Software Licensing Models: Change is a Good Thing

October 16, 2015
By Susan J. Campbell, TMCnet Contributing Editor

There once was a time when software licensing was the furthest thing from our minds – think college years. Computers were just starting to be used as a tool for learning on a much broader scale and this thing called Word Perfect could make word processing a whole lot easier. We didn’t want to have to go out and buy the program, so we borrowed a disk from a friend and loaded it.


It seemed innocent enough, and none of us believed we were doing anything wrong – not really. Even when the registration notices kept popping up, insisting we complete the process. We were poor and had no intention or the means to pay for proper software licensing and therefore sought the loopholes. These loopholes, as we know now, are damaging to software companies and the way they protect their revenue is by proper licensing. When you’re 18-20, you don’t really care.

Fast forward 20 years and the landscape has changed. Not only is it much more difficult to avoid software licensing, the cloud has introduced a number of challenges to the traditional model for the software developer. At the same time, according to this Flexera Software video blog, the customer experience and rising expectations for the value derived from software are also driving change. Amy Konary, Research Vice President at IDC (News - Alert) suggests we’re seeing a shift in pricing models that better align value with the customer experience.

In the past, the software provider had no “skin in the game” to make sure the customer was successful with their product and enjoying a positive experience. Now, expectations are changing and software developers have to step up to the plate and meet the demand. As a result of these dynamics and the global acceptance of the SaaS (News - Alert) model, subscription software licensing is gaining a lot of ground, even to the point that some providers no longer offer up front purchase opportunities.

Cris Wendt, Principal Strategy Consultant, Flexera Software, noted that the subscription economy is gaining traction, even as providers are concerned about the impact on revenue. In the perpetual license model, revenue is no longer recognized up front, but instead over time. This gives the provider the opportunity to develop solutions that address challenges missed by the perpetual model. It also offers the opportunity to drive more revenue over time as users are aligning the value with the experience and therefore, ready to work pricing into their budgets.

Nothing changes overnight, however. You do have to have a clear plan for making the transition and understand what your customers need and want. If you’re targeting the college student, there’s good news – they seem to have more money available for software than we did 20 years ago and enforcing software licensing is expected. And just for the record – I pay for all software I use now, even if I do miss the days of the “free”. 




Edited by Maurice Nagle

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