Considerations for Implementing a Software Subscription Model

Whether you are a total believer or not, it looks like the shift from perpetual software licensing to the software subscription model is here to stay. According to a Gartner report, “By 2020, more than 80 percent of software vendors will change their business model from traditional license and maintenance to subscription.”

Laurie Wurster, research director at Gartner, says pressure from cloud and commercial open source software has changed customer behavior. “Customers have moved from buying or leasing technology, to buying IT services, to ‘buying’ long-term relationships with providers,” said Ms. Wurster. “A hybrid cloud/on-premises model is rapidly becoming enterprises’ deployment model of choice, and most software providers are becoming businesses that deploy using a cloud model.”

The pros and cons for both ISVs and end users have been widely debated for some time now. From the vendor perspective, the subscription model provides tighter control over software usage, more predictable, recurring revenue, and a better deterrent to piracy. On the down side, some customers may continue to resist subscription licensing and seek alternatives.

For business end users, subscription licensing can have a lower, upfront cost and some will find it easier to manage compliance. On the negative side, the software could be more expensive to use over the long run and the business owns nothing at the end of the subscription period.

For personal consumers, subscription models are becoming the norm. Most antivirus applications, online games, memberships to online communities and office applications have successfully moved to the subscription model.

But like perpetual licensing or other models like feature-on-demand licensing, there are nuances to subscription licensing as well. For example, some subscription applications can be used only for as long as the license right is valid and stop running after the expiration date. Others can still be executed, but won’t give access to additional upgrades or updates that are released after the expiration date of the maintenance contract.

A few of the key factors to consider for a successful subscription implementation include:

• Ease of use for the subscription workflow and the user’s interface
• Ease of use for automatic renewal
• A pricing point that is proportionate to the perpetual license, most important for those ISVs who create both license models

If you are considering moving to a software subscription model, a flexible licensing platform will make all of the difference in the ease in which you can set up and implement the business model that’s best for your customers and seamlessly integrate the process into your back office systems.

Wibu-Systems has recently hosted a live Webinar where we have presented the basic foundations of subscription models and demonstrated how to configure and implement your own subscription model using CodeMeter License Central.

You can access the replay for "A Cash Machine for Your Software", here.