Permanent Licensing Vs. Subscription: which is the way to go?

The software industry is rapidly moving to a new licensing and revenue model. Some software buyers are readily jumping into this subscription space while others take their time to troubleshoot their concerns and answer the question “Permanent License OR Subscription: which is the way to go?” This blog post isn’t about favoring one or the other - it’s about strong reasons software buyers have for making this or that choice. Here’s our take on the issue in hand.

Perpetual license: pros and cons in a nutshell

Advantages:

• Predictable cost. One of the biggest perks of a non-expiring license is that you know how much you have to pay upfront – for some customers this way is easier and more convenient in terms of capital budgeting.
• This software is yours for life. There is a certain type of buyers who appreciate permanence more than others. Companies come and go whereas your permanent license will stay with you and continue to work. That provides a certain sense of security, doesn’t it?
• Fully-functional. While in the subscription model there are different rates corresponding to the scope of functionality a customer wants to buy, a permanent license encompasses all features which can be enabled/disabled by a user as needed.
• It won’t stop working if you have forgotten to initiate a monthly/quarterly subscription payment. Again, you are on the safe side.
• Do you always want to be on the latest version of the software? Or not really? We’ve got customers who have been using our software for 5 years. Having made very few updates, long ago they settled on one of the old updates that addressed their business needs best and never asked for more.

Disadvantages:

• High upfront cost. Permanent licenses are normally funded as CAPEX. Most companies are unwilling to make large upfront investments.
• Annual support, updates are not included.

Software Subscription: Upsides and Downsides

Pros:

• Lower acquisition cost. For price-sensitive customers with smaller capital budgets, subscription is clearly the way to go
• Spreading out costs. For those customers who don’t have funds for a full license fee, recurring payments make the product more accessible
• Flexible and scalable. You can buy the functionality you really need, remove or add users, discontinue the service.
• Support updates and upgrades are included.

Cons:

• Higher total cost. Over time a desktop/online subscription is going to cost more, otherwise no software vendor would bother to adopt this revenue model.
• No money, no honey! Should it slip your mind to pay or should you fail to find the funds on time, your license won’t be renewed, thus putting you in a tight corner.

On balance, whether one goes with a permanent license or a software subscription depends on the type of customer. In the end, acquiring business software is not an expense, it’s an investment! And it’s up to you to decide on how you would like to invest.