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Vendors Respond to Enterprise Demands for New Licensing Options

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Any software vendor that’s been paying attention to its customers in recent months will tell you that software licensing preferences are changing–and quickly. The past year, in particular, has brought about an appetite for more flexible licensing models that are less user-centric and more usage-centric. As IT organizations continue to chisel away unnecessary spending and take a more strategic approach to software asset management, they’re increasingly demanding “pay-per-use” (i.e. usage-based licensing) and “pay as you go” (i.e. subscription-based licensing) scenarios that are more directly correlated with the benefits received through the use of any given application. And vendors are listening.

According to a Computerworld article by Eric Lai, vendors are rapidly adjusting their license offerings to accommodate and take advantage of this shift. The article notes that 43% of vendors have changed or expanded their licensing options to include such approaches as usage-based and subscription-based pricing. (Subscription pricing, which has long dominated the SaaS market, is now becoming commonplace among on-premise offerings). And, according to IDC, these trends are only expected to accelerate.

Our own experience as a software publisher is very much in synch with these findings; as a response to increasing price sensitivity among prospective customers, we began to offer monthly subscription-based pricing earlier in the year. Subsequently, our new business for 2009 is comprised of nearly 50% subscription-based customers. And as usage-based licensing models take root among more end-user organizations, we’re finding a higher percentage of our customers gravitating toward our IT asset management suite, Express Software Manager, which offers, in addition to hardware and software inventory capabilities, software metering and control for concurrently licensed applications.

It will certainly be interesting to see what the next few years bring in terms of licensing practices. I’d expect licensing options to continue to expand so that both vendors and customers get closer to that elusive “sweet spot” where the cost of software is much closer to the value any given customer is able to extract from its use.