IT Software: Which Type of License is Right For Your Business?

Do you need to purchase new software for your business? Are you lost wondering how to decide between a subscription-based software and the traditional perpetual licensing model? Are you questioning what model will be best for your company in the long run?  

We get it. It’s a tough decision to make, especially considering the benefits of each. Before your team makes a decision it’s important to understand their differences and the benefits associated with each.  

Perpetual Software Licensing 

Perpetual Software Licensing is purchased upfront (in one big lump sum) followed by annual maintenance and support fees.   

Pros: 
  • Known for its use in the traditional budgeting process 
  • Provides licensing ownership for one particular version only 
  • Longer training tracks for IT staff—For example, the IT department will take the time to learn the solution up-front, and doesn’t have to worry about relearning until the next purchase.  However, since the licensing changes constantly, the IT department has to research this every year. 
  • Aligns with a typical IT department’s refresh cycle
  • The solution can still be flexible in terms of rightsizing—For example, the number of licenses can be adjusted, and software features can be added and removed. 
Cons: 
  • It is a heavy initial investment where if not purchased correctly, may persist the need to re-purchase the software down the road
  • Difficult to maintain in a dynamic and evolving technology landscape 
  • Difficult to incorporate into budgets that expand over three years or longer 
  • Support from the manufacturer could reach its end-of-life before a refresh is due 
  • Potential for no-renewal of the software—This would mean the client would need to purchase a new license. 
  • Asset value diminishes over time 

Subscription Software Licensing (SaaS) 

SaaS licensing relates to a monthly or annual licensing model allowing customers to pay an initial subscription fee by the user, entitling them to use the software only during the subscription term.   

Pros: 
  • Low-cost, and sometimes includes no upfront costs 
  • Easy and predictable for budgeting 
  • Provides a current version license at all times 
  • Provides the IT department with the latest technology and manufacturer’s support 
  • Flexible solution with the capability to be modified and adjusted monthly 
  • Cloud-based products lend themselves to this model and can offer additional features that protect the business. (e.g. backup and disaster recovery solutions) 
  • IT does not have to maintain infrastructure to run the software
Cons: 
  • May require on-going training for the IT department—Companies may be required to maintain specialized training or certifications. 
  • Includes a monthly, annual, or quarterly expense 
  • Typically requires an agreement 
  • Difficult to change solution vendors—For example, this license can lock the client into the solution for a specific period. 
  • Security concerns—For example, some SaaS applications’ corporate data may be stored in the cloud and thus require security and compliance reviews. 

All things considered, there’s no right or wrong answer to which model best fits your company. It really depends on your company’s strategy, goals, and growth Let ICG’s solution team help you determine which model(s) is best for your business!