What is a subscription license and how is it different from a perpetual license?
When I was first starting as a freelance writer, I had to make a lot of tough decisions about what software programs to invest in. I quickly learned that opting for subscription-based software licenses instead of perpetual ones was always the smarter choice financially. Not only do you get the latest version of the program with all its updates and support included, but you also save money in the long run since you’re not paying for an outdated piece of software that will eventually need to be replaced.
What is a Subscription License?
A subscription license is a type of software license that allows the user to access the software for a specific period. After the subscription period expires, the user must renew the license to continue using the software.
What is a subscription license and where did it come from?
In the days when Adobe Photoshop was originally released, it was a perpetual license. Back then, there was no alternative.
The subscription management technology that we now use wasn’t available when Adobe released the first version of their photo editing software in 1988. The world wide web, which we use to manage our subscribers, wasn’t invented until 1991.
Because Adobe Photoshop was such a big part of the business, they had to constantly make customers pay for it. However, a perpetual licensing model wasn’t the best way to do that. So each new version had to be better than the last to convince people to upgrade.
When Adobe ended its “perpetual” license for Adobe Photoshop, the price skyrocketed to $1000. This made it unaffordable for average consumers, so free or inexpensive alternatives to the software began to appear.
By switching their model to subscription-based, they eliminated the need for constant improvements to their software and were able to bring in more revenue and stave off the threats of competitors.
Other companies, like Adobe, have found that switching from perpetual licenses to subscriptions is equally appealing to both businesses and consumers.
One of the world’s leaders in 3D design software, AutoDesk, offers its award-winning 3D modeling and animation tools under a subscription-based pricing model.
These are tools that used to be very expensive but are now more affordable thanks to subscriptions. Microsoft Office, for example, switched to a subscription model and regained the market share it lost against Google Apps.
Benefits of a Subscription Software Model
Software-as-a-Service, more commonly known as SaaS, is a subscription-based model where software is hosted in the cloud and accessed via the internet.
The major benefit of subscribing to software is its ease of use.
With Software as a Service, the subscription fee includes all of the servers and storage space you need to host the application, as well as all the management and maintenance that goes into running it.
You can improve the efficiency of your factory with software, without having to run it yourself.
In the long run, it’s much cheaper to subscribe to a software solution than to buy perpetual licenses because you’ll be sharing the infrastructure between several companies, making it cheaper than buying individual, permanent solutions.
Some users may be concerned about sharing the same servers as other companies, but there is no more of a risk of security breaches with Software as a Service than there is with perpetual subscriptions.
When you subscribe to any service, you’re trusting that company to keep you safe. Subscription-based services, like Netflix, have several steps they take to ensure customers’ security.
When you sign up for certain services, they spell out what information they can and can’t collect from you. They also let you know what security measures they have in place to protect your information from hackers. They regularly update their systems to meet the latest standards and are quick to fix any glitches.
Revenue Opportunities for Your SaaS Business
One way to learn about what your customers need is by directly asking them. However, you can also learn a lot from indirect sources like analytics and usage data.
With free analytics tools, you can analyze your metrics in more depth.
Powerful, yet easy-to-use, metrics platforms can help you optimize your customer experience, improve user engagement, and predict when a customer will cancel.
What is a Subscription Model?
Software-as-a-service (SaaS) model is where companies pay for access to a product on a subscription basis. Customers have access to tech support and upgrades as long as the account remains active.
The payment terms for a SaaS product can vary depending on the type of service. Some services are paid on a weekly, bi-weekly, or annual basis.
What is a Perpetual License?
A perpetual license allows the customer to use the licensed product indefinitely. This contract can be held as long as the user wants.
The downside is that they may not be privy to the latest updates and tech support.
Perpetual License vs. Subscription: Which is Better?
In software as a service, subscriptions are becoming more popular over traditional licensing models because recurring revenues are part of the model.
Subscription models allow businesses to target specific markets, build better customer relationships, and maximize their profits.
Disadvantages of Software Subscriptions
The biggest disadvantage of a SaaS model is the risk of losing customers. Since subscriptions tend to be shorter, this can pose a financial risk.
SaaS businesses that follow the subscription model need to be aware of how efficient they are in different business functions. This way they can keep providing value to their customers and prevent them from leaving.
Subscription vs. Perpetual License: Which is Cheaper?
How do you decide between a perpetual license and a software subscription? Which is better for your company in the long run?
It can be tough to decide. There are a few things you should consider before making your decision.
By 2020, 80% of companies will be offering subscriptions instead of one-time purchases.
Because technology is always changing, it’s possible that the perpetual model could become obsolete in the next few years.
What is a subscription license? If you’re considering a subscription software license, there’s no need to worry about whether it’s actually cheaper than a perpetual license. With a subscription, you always have the latest version and access to updates and support. So go ahead and make the switch—you’ll be glad you did!