Featured Article from Software Licensing

Traditional Software Licensing Giving Way to Pay-Per-Usage Models

June 27, 2012



The traditional model of software licensing has historically involved annual renewable license models that contain maintenance elements or perpetual licenses linked to the number of users. Now, as more businesses transition to cloud computing, these traditional software licensing paradigms are giving way to pay-per-usage models.

Different models have their pros and cons depending on the needs of the company. According to Guy Creese, a blogger for Gartner (News - Alert) Research, SaaS pricing models have their advantages.

SaaS licensing fees are treated as an operating expense on a business income statement. Also, businesses that use SaaS can avoid having to purchase expensive servers and can reassign administrative personnel to tasks that involve innovation or revenue generation.

Additionally, support and upgrades are included as part of the monthly SaaS (News - Alert) price. Traditional software licensing models often charge a premium for support and upgrades.

“SaaS delivery models are threatening the status quo in the software industry because they’re more flexible, scalable and cost-effective, and certainly provide overall better value for money,” says AnsgarDodt, SafeNet’s (News - Alert) SRM VP of sales, EMEA.

For some organizations, however, more traditional models make sense. In general, three or four years of annual SaaS payments match the cost of purchasing a traditional software license. This does not, however, take into account equipment savings or savings on hiring in-house personnel.

Enterprises also lose the hefty upfront pricing that can make them rethink their purchases. If a company purchases software licenses for Version 3 of a product, then upgrading to Version 6 several years later requires a large sum of cash for new licenses, new training and the ever-costly migration process. Instead of making the upgrade, many companies go through a review of their solution so that they can choose the most innovative product on the market.

When companies use SaaS, staying with a product for the long-term becomes easy thanks to the complacency afforded by consistent low pricing. Companies don’t have the incentive to reevaluate their solutions, which could result in lost efficiency.

Many managers also don’t anticipate the challenges of managing software licensing in a virtualized environment. If a company in the Middle East uses a virtualized solution hosted in the U.S., then laws, rules and regulations will affect the company’s data usage and content.

Overall, SaaS is challenging many software licensing models. Competitive pressure and customer demand will force traditional on-premise vendors to reevaluate the status quo.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2012, taking place Oct. 2-5, in Austin, TX. ITEXPO (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. For more information on registering for ITEXPO click here.

Stay in touch with everything happening at ITEXPO. Follow us on Twitter.




Edited by Rachel Ramsey
Article comments powered by Disqus


Free Trials

See For Yourself Why So Many Trust Flexera Software Solutions

Featured White Papers / eBooks

Report: Software Licensing 2016: Seismic Shifts - Shaky Foundations

Report: Software Licensing 2016: Seismic Shifts - Shaky Foundations
Key Trends in Software Pricing & Licensing Survey - 2016 Report...

eBook: How Can You Monetize the Internet of Things?

eBook: How Can You Monetize the Internet of Things?
This eBook provides 5 tips for leveraging your intelligent devices and apps to gain higher revenues, competitive advantages and lower costs as well as discusses software monetization and licensing use cases and success stories...

eBook: 10 Reasons to Buy a Purpose-built Software Monetization Solution

eBook: 10 Reasons to Buy a Purpose-built Software Monetization Solution
Read this eBook that arms you with 10 reasons to buy - and not build - that can be used to develop the business case for leveraging a commercial Software Monetization solution...

eBook: How Do I Transform My Hardware Business and Supply Chain Processes to Support a Software Business?

eBook: How Do I Transform My Hardware Business and Supply Chain Processes to Support a Software Business?
This eBook discusses the hardware to software shift, the changing business requirements for successfully managing a software business and provides guidance on next steps...

Featured Press Release

Featured Webinars

Networking Leader Shares Why Transforming their Business was Key to Leveraging NFV Market Trend

Networking Leader Shares Why Transforming their Business was Key to Leveraging NFV Market Trend
Attend this webinar to hear Richard Jenny, Director of Program Management and DevOps with ADVA Optical Networking discuss why they decided to leverage a Software Monetization platform instead of building their own software licensing, entitlement management and software update solution.

Expert Panel: Software Monetization Trends and Best Practices with IDC and Flexera Software
Join Software Monetization experts as they share predictions and best practices on the topics that are driving transformation in the technology industry. If you are a software vendor looking to adopt new subscription, usage and outcome-based business models or a device manufacturer looking to monetize your software and establish recurring revenue models, this panel discussion will address all these issues as well as the impacts of cloud, virtualization and IoT.

Webinar: Software Monetization Maturity Model - How to Get Your Organization to the Next Level
Application producers are faced with many challenges as they try to grow revenue and streamline back-office processes, and those that are thriving have adopted a strong and well thought out software monetization strategy