Trend in sofware license durations?: SoftwareCEO

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August 3, 2008 1:41 PM

It appears that with the trend towards SaaS licensing, there is also a trend in traditionally configured software toward subscription models, although I wouldn't call it an overwhelming trend at this point. Sometimes these trends continue, and sometimes they reverse.

I don't have any data to support this belief, but I would surmise that among subscription models in the enterprise space the norm is one year.

I'm sure Jim G. will have a strong opinion on this question.

Phil Morettini
PJM Consulting
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Jim Geisman

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August 3, 2008 4:02 PM

I think Phil has given a good summary. There is pressure from SaaS for "term-limited" licenses and more companies are considering a move away from Perpetual + ongoing M&S.

That said, companies are reluctant to give up the large upfront payment so they are slow to move to a subscription model.

As for license term, most term licenses are greater than one year. Three is pretty typical. Often there are financial incentives for longer term. In addition in the SaaS world there are also discounts for upfront payment.

HTH

Jim Geisman

[COLOR=DarkRed][B][URL="http://www.softwarepricing.com"]Software Pricing Partners, Inc.[/URL] [COLOR=Black]+508-647-0330[/COLOR][/B][/COLOR]

ippu

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August 4, 2008 11:06 PM

Great - thank you very much for your very clear answers.

mriffey

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August 4, 2008 11:11 PM

I would like to know what is the trend in enterprise software license durations, in case of premises based software? What I meaan is, that instead of having a perpetual license fee, are there more and more companies moving to license fees that need to be renewed? And what is the renewal period - is it tyîcally 1, 2 or 3 years? (or something else)

No doubt, Jim G is the go to guy on this topic.

Ill toss in something from the other side of my head, just as something to think about.

If renewals are involved - what time period is optimum for end user recognition of your software's value.

In real English, how many days/months/years does it take before the end users start calling and thanking you for your software? Or before they reach some point in its use where they cant help but think "Man, we'd be nuts to get rid of this"? And so on.

Thats a timeframe I'd think about tossing into the mix along with what Jim suggested.

Mark

ippu

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August 4, 2008 11:20 PM

Hi again,
I forgot to ask, whether in case of the "term-limited" licenses companies typically also charge for the on-going M&S during the "term" (assuming the term is longer than one year)?
If yes, is the M&S, as percentage of license fee, at the same level as for perpetual licenses?

Would be really greatfull of any inputs.

mriffey

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August 4, 2008 11:28 PM

Hi again,
I forgot to ask, whether in case of the "term-limited" licenses companies typically also charge for the on-going M&S during the "term" (assuming the term is longer than one year)?
If yes, is the M&S, as percentage of license fee, at the same level as for perpetual licenses?

Would be really greatfull of any inputs.

In my experience, Ive always tried to give them 1 all-inclusive monthly number so that budgeting and such isnt an issue and so that they dont get that nickel and dime lovin' feeling, but my experience is not in the enterprise - at least my experience on this particular topic.

Best to wait for Jim G the pricing wizard's reply.

Mark

Jim Geisman

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August 5, 2008 6:45 AM

Go with a single, all-inclusive fee like Mark says...

As for how much to charge, most companies follow the percent-of-[perpetual]-license-fee model. This can be a problem for a term license.

For example if you are charging 33% of the perp license fee annually, add 15-25% percentage points for M&S and you are up to something like 50% of the perpetual fee. A price like that defeats the purpose of a term license (lower priced, recurring fees).

I would recommend a more considered approach since a lot of customers are asking what they get for their money. The M (maintenance) part of the fee scales by how many "units" are distributed and the costs of distribuition for you or your customer. The S (support) part of the M&S fee scales by the number and nature of support incidents that you have to field.

Think about how much value the M and the S actually provide and charge accordingly. (BTW, make sure you are clear on what is included in the M piece. Are upgrades in or out?)

If you are clever you can bundle a low but adequate level of M&S with the base product and offer higher levels as a premium offering -- perhaps with a premium version of the product.

HTH

Jim Geisman

[COLOR=DarkRed][B][URL="http://www.softwarepricing.com"]Software Pricing Partners, Inc.[/URL] [COLOR=Black]+508-647-0330[/COLOR][/B][/COLOR]

ippu

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August 5, 2008 8:36 AM

Thank you again. So what I understood from your answers is that in case premises based solutions priced as "recurring charges"
- the the M&S costs should part of the "recurrging" costs
- the recurring costs for enterprise customers are mode likely yearly than monthly.

Now, if instead of recurring charges (yearly or monthly), the epricing is based oin the "Term Limited" license of let's say two years - for business customers:
- Are the M&S costs typically the same % in this "Term Liimited" license model as in the Perpetual model?
- Are these M&S costs in this case part of the "Term Limited" liecense cost, or charged separately like in case Perpetual liecense costs?

SoftwareCEO

Trend in sofware license durations?

ippu

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