During the last decade or two, the software industry has faced a gradual

shift in the way software is licensed and paid for.

Historically, software vendors would sell their software on perpetual license agreements, i.e.

the license would not expire.

You paid for it once and you could use the software for as long as you wanted to.

If you wanted to upgrade to the latest version of software, you would additionally need to pay for

Maintenance.

The problem with perpetual licenses is that it encouraged software users to hold onto their

software for as long as possible.

leaving many organizations with out-of-date software while also reducing sales for software vendors.

As cloud software has become more popular, it presented an opportunity for

software vendors to change how their software was licensed,

moving from “pay only once” perpetual licenses to paying monthly or annually via a subscription.

Cloud subscriptions are generally much cheaper up front;

however this does not mean they are necessarily cheaper over the long term.

Below are the main differences between cloud and perpetual software

licenses that you should consider when making your purchasing decision.

 

      • Cloud products make it easier to be compliant. Since cloud is a subscription i.e. SaaS (Software-as-a-Service), you can only use it when you pay for it. Due to this licensing nature, you only receive the intended product: no more, no less. This, unlike perpetually licensed software, which can often be installed easily and harder to track and manage.

       

      • Cloud software is updated frequently. This is both good and bad. On the plus side it means you have the peace of mind that you are always using the latest version of the software. On the negative side the regular downloading and installation of updates can be disruptive to your workflow (since they often take place at the start of the working day), the software UX can change without warning and new bugs might be introduced.

       

      • Cloud is easier to control and manage. A software dashboard generally gives good visibility of your account, including how many licenses you have, installations etc. (although some dashboards are better than others). However, because it is so easy to deploy more software, many customers find themselves “over-licensed” by overpaying for suites they don’t necessarily

       

      • Cloud is considered Opex, perpetual is Capex, so there are financial considerations when choosing between them. This will affect your tax and accounting positions, as well as the Total Cost of Ownership of the software itself.

       

      • Perpetual licensing is considered “old school” and obsolete. This does not necessarily mean it is the wrong license for you. While some vendors have moved entirely to cloud licensing, many others still offer a choice between cloud and perpetual licenses. You need to weigh up the options for your organization and not simply choose cloud every time just because it’s the latest thing.

       

      • Beware “hidden” costs of cloud software. Aside from the risk of being over-licensed, there are many hidden costs such as increased network load, volume, traffic etc. that are more difficult to quantify.

 

There are many more items to think about, but these are the main considerations

when choosing between cloud and perpetual software licenses.

However, as with everything in business,

you should seek professional advice to ensure you make the right choice for your business.

Bottom line: One is not better than the other.

Sometimes there is a good reason to use both types of licenses in your organization.

Contact us and We’ll be happy to help: info@emerset.com.

Dec 2020