Subscription or Perpetual Licensing? What are the advantages and disadvantages?


Following on from recent blogs in which we primarily addressed topics relating to Unified Communication, today's blog is dedicated to the topic of software licensing. Software is now available for all conceivable requirements and applications. But in addition to requirements to be met by the software, customers should also think about how they wish to acquire the software. For as most people already know, there are basically two different acquisition methods:

  • perpetual licensing (purchase), i.e. the customer buys the software or
  • subscription licensing (leasing), i.e. the customer leases the software.

This blog explains what exactly the differences are and the advantages and disadvantages of the two models. For you must have already wondered whether the increasing number of subscription models on offer really offer additional advantages over perpetual licensing or not.

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Perpetual Licensing (purchase)

Perpetual licensing refers to the purchase of software. In a nutshell, this means that the customer purchases the software for a one-off license fee and then subsequently pays an annual fee for maintenance and software if he so wishes. The annual costs for maintenance and support usually amount to approximately 20% of the one-off license fees. These annual payments entitle the customer to install and use the latest software version. The customer also has the right to make use of the software manufacturer's support in case of problems.

Subscription Licensing (lease)

As mentioned earlier, as well as conventional perpetual licensing, software is increasingly offered on a subscription basis. But what does subscription mean exactly? If the software is not purchased, but rather leased, we use the term subscription licensing. In this case, a subscription fee is payable on a regular basis (monthly, quarterly or annually), which, in addition to the right to use the software, already includes the right to maintenance and support for the product.

To summarize, I can say that customers adopting the subscription model definitely benefit from more flexibility and, depending on the useful life of the software, a better cost-benefit ratio compared to purchasing the software. In spite of this, there are clearly cases in which purchase of the software (perpetual licensing) has to be checked due to specific requirements.

Our attendant solution talkbase is usually offered on a subscription basis. If required, we also offer of course the perpetual licensing model. For as already stated, the decision in favor of one model or another always depends on the situation and requirements.

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