Critical.
Authoritative.
Strategic.
Subscribe to CIO Magazine »

Are SaaS & recession killing perpetual software licenses?

Many customers prefer licenses over subscriptions
Page:

Danube Technologies is a small maker of software tools for Scrum and agile programmers. While Danube's technology and audience is cutting-edge, its licensing model is old school.

Several weeks ago, the vendor switched from selling subscriptions to its software back to selling perpetual licenses.

"We're not doing this on a whim," said Danube co-founder and CTO Victor Szalvay. "But based on the feedback we got, our customers aren't keen on the subscription approach."

That may seem surprising. Subscribing to software requires much less upfront investment than buying license for it, just like renting costs less upfront than buying.

The subscription model has also been boosted by the increasing popularity of software-as-a-service and open-source software, both of which typically use subscription licenses rather than perpetual licenses. For enterprise software, a perpetual license typically involves an upfront fee plus an annual maintenance fee of 20 to 25 percent for patches and upgrades.

Even Microsoft, the most visible champion of perpetual licensing, is starting to embrace subscription models as it adds more Web-based services.

But experts say there are plenty of reasons why perpetual licenses, while unfashionable, are nowhere close to being on the way out in the enterprise.

One reason is that perpetual licenses are safe. They grant users the right to use the software indefinitely.

"Owning the license outright is important," said Al Hilwa, an analyst with IDC. A company could go out of business, sell its intellectual property, or simply kill that product line in favor of a newer one. But by owning the perpetual license, the companies can continue to use the software.

Enterprises also view buying a perpetual license as an investment in that vendor. They don't mind paying a little more upfront if it will help keep that vendor in business, providing bug fixes and new features, Hilwa said.

"Enterprises put a heavy premium on longevity, quality of service, and their vendors being around for the long run," he said.

Owning a perpetual license also makes customers immune to potential price increases that subscriptions are subject to, just like rent increases by a landlord. They are also not as complex to keep track of, Hilwa said.

Page:

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

More about: Adobe, Adobe Systems, Amazon, Amazon.com, IDC, Macrovision, Microsoft, PLUS, Sun Microsystems
References show all

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
Users posting comments agree to the CIO comments policy.
Login or register to link comments to your user profile, or you may also post a comment without being logged in.
Related Coverage
Related Whitepapers
Latest Stories
Community Comments
Tags: SaaS
Latest Blog Posts
Whitepapers
  • Information Security Policies, Standards and Procedure
    As a result of the adjustments in the way business is conducted, ownership of information does not carry the same clear accountability it once did. Physical and behavioural boundaries used to exist around information management but these can be missing in the modern workplace. Clearly thought-out information security policies, standards and procedures addressing internationally supported standards, will go a long way to addressing the risk exposure these changes have created. In this third paper, “Policies, Standards and Procedures,” we discuss guidelines for effective information security management.
    Learn more »
  • Eight things senior managers need to know about data encryption
    Securing sensitive data is a must for every organization. Today’s encryption solutions don’t slow down your users, so you’re not compromising productivity for security. Here are eight things senior managers need to know about encryption to keep their data secure.
    Learn more »
  • A Technical Overview of the Oracle Exadata Database Machine and Exadata Storage Server
    Businesses today increasingly need to leverage a unified database platform to enable the deployment and consolidation of all applications onto one common infrastructure. Whether OLTP, DW or mixed workload a common infrastructure delivers the efficiencies and reusability the datacenter needs – and provides the reality of grid computing in-house. Read on.
    Learn more »
All whitepapers
rhs_login_lockGet exclusive access to Invitation only events CIO, reports & analysis.
Recent comments