Pay-as-you-go software at a VAR near you

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 identifies several key reasons for the shift including customer

discontent with current software licensing practices and complexity in licensing environments such as varying software acquisition methods among vendors.

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.

Making the switch

“”We’ve been working a long time as volume licensing experts to make sure our customers are in the best licensing model,”” said MacDonald.

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.

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 — the near inside of the very shortest possible life that anyone would want to get when they bought one. That assumption was not realistic,”” said Kay

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.””

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Jim Love, Chief Content Officer, IT World Canada

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