Perpetual vs Subscription Software: What Works for Your Business
by Arianna Carter, on Oct 10, 2016 9:49:20 AM
Moving to a “pay as you go” subscription model seems to be the latest trend for software providers. Perpetual vs subscription both have their pros and cons, however it’s simply about finding which works best for your business and budget.
Over the past few years this new model has gained a lot of traction with major providers like Adobe and Microsoft Office leading the pack. The change in the way software is provided is prompted by a change in the economy. When starting a business, if there a little to no money upfront the last thing you want is to break your budget on things like software before opening your doors and making a profit. As an end user however you may feel differently, if you’re not profiting from your software you may view getting a monthly bill for it as a drag. Fortunately, NovaStor offers perpetual and subscription options for all server class products. Let’s take a closer look at the differences.
|You own it||You lease it|
|Pay everything upfront||Low cost to get started|
|Maintenance fees||No maintenance fees|
|Eventually becomes unsupported||Free upgrades|
|No monthly bill||"Pay as you go"|
Perpetual is the way things have always been done. Pay all the costs upfront and you own the license outright. With the perpetual model, your software is good as long as it is compatible with the operating systems and any other applications it interacts with. There is typically a yearly maintenance fee or some sort of annual percentage to cover things like occasional bug fixes, version upgrades and technical support.
The downside of the perpetual from providers is often with the technical support. End users often end up on older versions, or do not upgrade regularly, leaving the provider trying to solve problems related to unsupported software. Additionally, if a maintenance fee is required yearly there must be a system for reaching out to customers with maintenance renewal reminders and the profits for renewals may not always be worth the effort.
Moving into subscription model alleviates the need for reminding customers to renew their software licenses. On a “pay as you go” model customers pay monthly for the software, bug fixes, upgrades, as well as technical support.
The subscription model for software also drastically lowers the upfront costs of software. Sometimes requiring nothing upfront and typically starting as low as $20 a month, this is definitely the more budget friendly options for businesses starting out. Additionally, the subscription model allows users the flexibility to choose which programs and features work best for them.
Subscription licenses also add value around tax time. Not only are you able to plan your budget efficiently, you are technically leasing the software. With assets you can only claim depreciation, when leasing the entire cost is tax deductible.
When deciding which model is best for you it’s necessary to weigh all the pros and cons. For some, physically feeling they have ownership over the licenses is important in these cases perpetual is best. Others want the flexibility to choose when they come and go and what they pay for, for these users subscription model is best for them.
Many assume that the subscription model is meant to attract higher fees overtime by luring you in with such a low upfront cost. However, this logic couldn’t be further from the truth. Subscription based software drastically lowers the rate for piracy which overall reduces the costs of software. With a smaller upfront investment, you know exactly what to expect year after year and know you won’t have complications keeping critical software up to date.