Will subscription offerings impact software license management in 2010?
As the New Year arrives and enterprises clarify their software license management goals for 2010, the overarching question is how to align the company’s software investment with the actual value delivered by the software. How can an organization be sure that it will only buy the software that will actually be used? And how can an enterprise be sure that perpetual licenses acquired in previous years will be sufficient to cover the ongoing needs of the organization?
One approach that could simplify this problem would be to acquire more subscription-based licenses. This could be an attractive alternative to perpetual licenses. With subscription licenses, planning and purchasing decisions could focus on a one-year horizon instead of a much longer time window. Indeed, industry observers predict that enterprises may begin to demand subscription offerings from their key software vendors.
For example, Jim Geisman of Software Pricing Partners gave the following advice to ISV’s:
“If you use perpetual licenses, the easiest place to take immediate action is there: Stop using these licenses. Offer shorter term-licenses (annual subscriptions) to new prospects instead. (You may also want to bundle support and maintenance with the subscription license fee.)”
Is there evidence that ISV’s are heeding this advice and creating more subscription offerings? The results from Flexera Software’s Pricing and Licensing Trends Survey from the previous three years paints an interesting picture. The following percentage of ISV’s reported that their primary offering to customers were subscription-based:
| Survey Year | Percentage of ISV’s |
|---|---|
| 2007 | 36% |
| 2008 | 34% |
| 2009 | 29% |
Even more interesting is the ISV’s prediction that their primary offering in two years will be subscription-based:
| Survey Year | Percentage of ISV’s |
|---|---|
| 2007 | 48% |
| 2008 | 45% |
| 2009 | 32% |
Apparently, in 2007 and 2008, software vendors anticipated they would significantly shift to subscription offerings by the end of 2010. However, by 2009, this shift had apparently not started. In fact, the self-reported projection is that the number of ISV’s offering primarily subscription-based licensing will remain even in 2011 at the historic levels of 30-35%.
Perhaps one reason that the expected shift to subscription pricing has not yet materialized is that ISV’s assume that subscription pricing is only suitable for on-demand offerings. I think this is unfortunate, since many options are available for ISV’s to license even on-premise software on a subscription basis. If ISV’s would consider this option, they might find a shorter path to satisfy enterprise customers who are closely optimizing their software investment.
While such enterprises may be looking for subscription offerings as a way to simplify their software license management process, it is quite possible that their wish will have to remain on hold for another few years. In the meantime, as enterprises set their software license management goals for 2010, they will probably need to continue looking for techniques to manage the challenging problems of perpetual software licenses.
Do you think that ISV’s should provide more subscription-based offerings? Do you think such offerings would help you better manage your software license investment? What impact would subscription offerings have on your software license management process?
Art Middlekauff is President of Engineering for Flexera Software’s enterprise license optimisation solution
