Should you make the switch from perpetual to subscription-based software licensing?

A simple decision like that could turn your business around, so let’s analyze the pros and cons of this two different pricing strategies.

Perpetual licensing

This system is all there have been for many years, the customer has to pay upfront for the usage license and eventually pay a recurring fee for maintenance services that take care of fixing bugs and to run occasional upgrades.

Many companies have had lots of success with this conventional model where software is treated pretty much like a physical good, something you buy, own, and occasionally pay to fix it. Perhaps also because, up until not long ago, software was sold on a CDs in very fancy boxes.

With this option the user has higher initial friction because the first investment is higher than a Subscription license but the cost is subsidized over time for the fact that they can use the software for as long as they want, or as long as the software is not obsolete! Software aging is actually a main customer concern, nowadays people are very used to constant free updates, so the lack of such thing can make them feel like they are falling behind.

Subscription licensing

Subscription licensing the another alternative, one that is currently really picking up and has been appreciated by businesses all over the globe in all industries. In this scenario the customer can get the program on their system for free, and then pay on a monthly basis in order to be able to use it.

When costumers have a smaller budget the subscription license is a better choice because the first investment is smaller than that of a Perpetual license and customers know exactly how much they’ll spend each year. Customers also do not need to worry about software updates because they would be included over time. Basically for an annual fee they would be all set.

Subscription based software licensing is taking over the market because of it’s low friction entry point for the consumer and the steady, more predictable income for the programming company. Something to consider though is that people are starting to have so many subscription on their credit cards that could become hesitant in front of another subscription.