Featured Article from Software Licensing

Software licensing used to be a fairly simple prospect; buy a piece of software, buy the license to use it. There wasn't much flexibility involved, and that left plenty of customers unhappy. Recently, software licensing as a subscription service started to gain ground, and that's changing the game for both users and producers alike, as described in a new report from Beta News.

Increasingly, software makers are turning to subscriptions to produce revenue as well as keep customers happier about flexibility of service. A Flexera Software report notes that 26 percent of software producers derive all applicable revenue from perpetual software licenses, and this already-low number is only set to fall off. By 2017, that number will be down to 14 percent. What's more, 61 percent of respondents derive at least half of revenue from perpetual licenses, and this will likewise drop to 54 percent by 2017.

This means a lot of revenue departing the system, unless it's picked up elsewhere. Right now, that elsewhere seems to be subscription licensing. Becoming more readily accepted thanks to improved flexibility and scalability—perpetual licenses don't work well on that front thanks to a comparatively static nature—businesses are eager to get behind a pricing model where costs change according to needs on the ground. What's more, businesses get a better chance to try out software before committing to it; perpetual licenses require software to simply be purchased and licensed, whether it's the software for the job or not.

Subscription licensing allows for greater flexibility as it allows businesses to pay for the time the software is used. There are similar models that use different criteria, like usage-based licensing. Usage-based licensing allows for licensing according to measures of consumption, while capacity licensing is based on the size of the server on which it operates.

Several reasons are readily available for the popularity of subscription licensing, but perhaps the biggest of these is that sheer flexibility. Why use a one-size-fits-all licensing scheme like perpetual licensing when all sorts of customers are eager for more customized options? We've already seen how regular consumers want a more custom experience, tailored to needs and desires, so why wouldn't business customers feel similarly? With these new options, businesses can get access to the software that's needed to improve operations, but without having to pay for licenses that go unused, or worse, having to pay additional cash in the middle of an operating season in the midst of a “true-up.”

Flexibility and scalability are two big points for businesses these days, and offering different software licensing models can sometimes make the difference in terms of what software is actually purchased. With more software makers going to subscription-style licensing, most others will need to follow suit or risk getting lost in the competition, so it's clear that predictions of reduced revenue from perpetual licenses will likely prove a self-fulfilling prophecy.