With software subscription licensing, you pay a fixed amount per month to make use of the software. It is an alternative to buying the software licenses. But why would you choose for subscription licensing?
No major investment required
The costs of software are always an issue for companies (and individuals). Depending on what type of software you need, there may be, in addition to the licenses, also costs for hardware, infrastructure, maintenance, training, support and implementation. And then there is the time and energy that you must put into the implementation yourself. It is not pleasant to make a large investment in advance, without directly benefiting from it. Even though in the long term the software will save you time and costs and make you more successful. You can reduce the initial investment by choosing for subscription licensing. You will not become the owner of the software, but you still get to use it.
You don't know what the world will look like in 10 years. Or in 5 years. Or maybe it is even unclear how your company is doing in 1 year. How will the economy develop? What new needs do your customers have? How does the technology evolve? To what extent will you succeed in realizing your company's ambitions? Just some questions that are difficult to answer. Or think about the impact of COVID-19. This uncertainty requires flexibility. And with subscription licensing you are flexible. You can adjust the number of users up or down each month and add or remove modules every month. You do not have to write off the software licenses over an X number of years or sign a contract for a long period.
"Subscription licensing makes costs predictable and stable."
Predictable and stable costs
Traditionally, when plotting the costs of business software over several years, you see large peaks and troughs in your graph. High costs in the beginning, payments in advance every year for maintenance and support and every few years a costly upgrade. Subscription licensing makes costs predictable and stable. The subscription fee can include multiple components, such as licenses, maintenance, (technical) support, bug fixing, updates and upgrades. This way you know very well what to expect in terms of costs. And that makes it a lot easier to make decisions with respect to your business and your strategy.
Is subscription licensing then always the best choice?
No, it depends on your situation. It may very well be that the above benefits are not important to you at all. Simply said; if you have enough financial resources, don’t need that much flexibility and are able to deal with peaks in costs, purchasing licenses is probably more interesting. Because if you do the math over multiple years, chances are that your total costs will be lower when you purchase the licenses. When you have the choice between both licensing models, it is wise to make a calculation and consider the advantages and disadvantages plus risks.