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Wednesday, October 12, 2005

Enterprise Software : Term Licensing Ahoy

Just came across this eWeek article on software licensing preferences & trends.Enterprises are veering around the view that limited-term licenses offer lower risk to vendors and to customers compared with long-term perpetual licenses. Despite the advent of multicore CPU’s clearly enterprises are not making a significant move to processor-based licensing, finds a new study. More and more enterprises and vendors are moving toward concurrent-user licenses, which allow a set number of people to use a software package at any given time. Here the buyer monitors software usage to ensure that they are in compliance with the license terms and aren't exceeding the total number of concurrent users they have paid for. The preference of the enterprises is towards some kind of digital compliance model rather than a self-tracked compliance model enforced by a written contract. In recognition of this shift,more and more software vendors are moving toward subscription-based term licensing terms & fees (annual or monthly)and away from perpetual license terms. The trend towards subscription based pricing is expected to continue as more and more enterprises prefer that option. The one license enforcement model that is clearly dead is the hardware dongle or USB device attached to the computer that enables users to install and run applications. Product activation and network licensing would become important elements of license enforcement mechanism in future.
The limited term license can lower the entry price and broaden the market to a wider ranger of buyers who might not be able to otherwise afford the software. Improved cashflow for both product companies and customers are among the clear benefits. With some customers, this approach could help them to get releived of gulity lick-ins(made out of wrong choices or respond to changing market conditions). I agree with Ken Berryman when he says that software companies have to pay more attention than ever to their pricing strategy because industry maturation, consolidation and globalization have slowed industry growth down to about 5 percent or 6 percent a year, equivalent to gross domestic product growth. He contends Software companies have to "improve tactical pricing performance to rapidly identify market changes" to take advantage of opportunities and to avoid pricing that puts them out of sync with customer demands and business conditions, and adds that the cost over the lifecycle of the application would become an important consideration for new software adoption by enterprises. Clearly the structure, style and measures of performance of software industry - particularly enterprise software indstry is set to change dramatically.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"