A recent IDC survey of software vendors and major business customers shows the perpetual licensing model of customers purchasing software rights up-front for applications will soon be replaced by subscription licensing plans.
The report, which was released in March, identifies several key
reasons for the shift including customer discontent with current software licensing practices, and factors that create complexity in licensing environments, including a variety of software acquisition methods that vary from vendor to vendor.
CDN followed up on the U.S. study with two top Canadian software resellers to find out what trends they’re seeing in software licensing. While both VARs acknowledge the trend towards subscription licensing plans such as Microsoft’s Software Assurance program, their customers’ subscription licensing adoption rates vary.
David MacDonald, president and director of Toronto-based Softchoice Corp., said his company has seen that trend over the last year and a half.
“”The subscription model has been in place for quite some time in the industry,”” said MacDonald, citing Oracle as the industry leader with Novell, IBM and Symantec also moving in this direction.
“”We’ve been working a long time as volume licensing experts to make sure our customers are in the best licensing model. Microsoft and other vendors have made the subscription base the most attractive offer. Our job is to reduce the complexity of volume licensing and we really see our skills in this area have transitioned a lot of customers into subscription-based. It’s the best value and it gives the customer more long-term control.””
Over 80 per cent of Softchoice’s corporate customers and 60 per cent of its small and medium business customers have switched to subscription-based licensing.
The situation, however, isn’t progressing as quickly for Software Spectrum Canada. Michael Charter, Canadian country manager, said over the last year software publishers are starting to develop subscription and lease licensing models, but more customers have signed enterprise-wide types of licensing agreements.
“”Customers are still primarily signing perpetual (traditional) types of licensing agreements,”” said Charter. “”But more and more companies are considering volume licensing programs that had not previously done so.””
The Mississauga, Ont.-based VAR provides licensing programs that software companies make available and various perpetual and subscription programs.
“”Software Spectrum works closely with the publishers to ensure we can effectively offer their licensing programs to customers,”” said Charter.
One of the key issues that can arise, however, is the license period is sometimes shorter than the customer originally intended for the life of the hardware and software. Roger Kay, director of client computing at IDC in Framingham, Mass., said this is an example of where Microsoft went wrong when it attempted to do this type of licensing with its corporate customers.
“”It turned out that in order for it to be equal financially it assumed a two-and-a-half year life for a PC,”” said Kay. “”A two-and-a-half year life is the near inside of the very shortest possible life that anyone would want to get when they bought one. That assumption was not realistic.””
He said a better plan would be based on a three-and-a-half to four-year life on a desktop, a time period that’s based on IDC research. “”Over that same period of time, four years, you would pay more for a subscription plan than you would if you bought the perpetual one.””
Kay says pay-as-you-go licensing presents a service opportunity for resellers.
“”I think as much as resellers supply services, they’re up on what needs to be updated. They can check things out for people to make sure they’ve got what they should have,”” he said, adding that in theory, there shouldn’t be a service opportunity.
“”The thing doesn’t break but because the operating environment is so brittle, there’s always some reason why somebody needs to intervene.””
Softchoice, for example, has outside sales reps who meet with customers and inside people who are licensing experts.
“”We define the customer’s requirements with the outbound people and then we work with our inside people to develop the best licensing approach for our customers whether it be subscription base or enterprise agreement,”” said MacDonald.
Software Spectrum, a large account reseller for Microsoft, said its customers depend on it to “”unravel”” all their licensing options.
Said Charter: “”We have provided and will continue to provide significant advice and opinion and best practices around programs such as Software Assurance.””