Software licensing grows complex
Cache Advance
By
Linda Musthaler
,
Network World
, 07/26/2004
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If it doesn't exist already, we might soon see a certification created for enterprise software license management. This certification
would combine technical knowledge of software usage with financial knowledge of the software value. The process of figuring
out what kinds of licenses are best for your organization, and tracking them, gets more complicated every day. The whole IT
industry is ready for a shake up in the way that customers pay for software use. And for once, customers are driving this
paradigm shift.
The primary pricing model today for enterprise software is perpetual licensing - you pay for the software upfront and use
it as long as you want. In addition, your organization probably pays a monthly maintenance fee that's a percentage of the
purchase cost. However, coming on strong as an alternative is subscription-based pricing,with which you pay monthly for the
software you use. You might license the software for a year or two at a time and have the right to use it only during the
subscription duration. Upgrades and support services are factored into the monthly payments.
Sun grabbed headlines recently by announcing it is developing a subscription pricing plan that includes pre-integrated hardware, software and services. I wouldn't call Sun's plan revolutionary, but it certainly
is an evolutionary step in the IT industry.
According to a recent IDC study, we are in for dramatic shifts in software business models. Citing a "complexity crisis,"
IDC says that less than 30% of software customers believe vendors' licensing practices are fundamentally fair, favoring (surprise!)
the vendors over the customers. One of this study's surveys indicates that 61% of software vendors and 60% of customers expect
the software industry to move to subscription licensing in the next year. Only one-quarter of all software sales today are
tied to subscription licenses.
Subscription licensing has its benefits. First, you get to spread out the payments, rather than writing one big check upfront.
This might let you account for software use as a business expense rather than as a depreciating capital investment. What's
more, payments for software are more predictable, helping you manage a budget.
In addition, subscriptions offer a low-risk opportunity to try new software, perhaps for a 60- or 90-day trial period.
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