- Parthenon Software Group
The world is full of completion. From sports to job leads and so on, there's always some way that one person can succeed over another. Such instances also include pricing for enterprise software. Typically a license is needed in order to operate the software, but more recently there's been some talk about charging subscription pricing as a way to keep up with demand.
In order to fully understand the full picture, let's backtrack a bit and review the more traditional pricing setup; that of enterprise licensing (also known as perpetual software).
As everyone knows, enterprise software and applications are designed to be useful and even vital pieces of an organization's operations. That being said, such tools can't be given away for free, thus the licensing feature.
But why this particular setup?
We’re talking about a large scale license that enables unlimited use of the resources by any number of users within an organization. We're also talking about support should something go wrong. This model also incorporates an upfront fee in order to allow all users to use the software. And the organization who bought the license, will own their version of the software and can do whatever they want with it, including customization of the software, though there will probably be certain restrictions and limitations. Moreover, there's also a high level of functionality given extensive software.
Still, for all that is good about enterprise licensing, there's generally been bad press about it. Most of it stems from the large upfront fee, which many organizations are unable to pay. There's also a lack of flexibility, especially in terms of upgrades that require support and maintenance.
So, we've covered the traditional enterprise model, but what about the subscription model?
This approach has come about largely due to the recession and as well as rising SaaS (Software-as-a-Service) popularity and pressure to offer more pricing choices.
What all does it entail?
As the name suggests, subscription pricing is all about providing access to software on a pay-as-you-to rate based on a monthly fee instead of a yearly fee. Moreover, you forgo the upfront costs seen in enterprise licensing. At the same time, you don't necessarily need to worry about additional maintenance and support fees as they are already included.
Sounds pretty good doesn't it?
The subscription model does have its strong suits. In particular, it shines in terms of predictability, scalability, flexibility, data conversion, testing and fast training. Still, keep in mind that many of the positive features in enterprise licensing aren't always available in a subscription model. For instance, customization, queries and reporting as well as functionality are extremely limited if not altogether nonexistent. This is because of the multi-tenant nature of subscription models. And that price tag? It's important to point out that while the pricing is lower in the beginning, it will eventually start to add up and can end up totaling more that than the cost of a license.
As with most things, the decision to use either enterprise or subscription models depends on the people, any projects and business needs involved in the process as well as the process/situation itself. At some point, you will have to decide if a subscription-based model is more advantageous for the company, or whether it's better to stick with the traditional route. It's all about what value you put on the process. Not all methods will work for a business. There will be cases where a subscription-based model is better and other times when Enterprise licensing is better. The main consensus is that you should make a decision based on what it is that you want to optimize for as well as your financial situation.
So, what's the main point of all of this?
Both pricing models are viable options. Typically, simplicity is a key demand, as opposed to flexibility and exact price usage, but that doesn't mean that there won't be times when you use one or the other, or maybe even both in certain situations/settings. it just depends on what you’re looking for as well as how you intend to use the software.