Update: CA switching to subscription-based software licensing

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Computer World –

Old wine in a new bottle: That's the reaction from analysts to a new subscription-based software pricing scheme announced today by Computer Associates International Inc.

Under the new approach, users will be able to buy CA products via a monthly subscription method instead of licensing specific packages for a predetermined number of employees. CA officials said the subscription-based sales model will let users vary the mix of software that they use as their business and technology needs change, as long as they stay within the overall dollar value of their contracts.

Sanjay Kumar, Islandia, N.Y.-based CA's president and CEO, said the new scheme was developed after users "told us they need more flexibility in how they license software and a faster, simpler, more cost-effective way to do business with us." It's also an attempt to give CA a more predictable revenue stream, he added.

Kumar said executives at the software company hope that the new licensing model "eliminates the back-end-loaded nature of our business, where most license agreements are concluded in the final days of a quarter." For example, he pointed out that more than $1 billion of CA's $1.6 billion third-quarter revenue total came in during September.

The new pricing model should give mainframe users more flexibility to define the length and dollar value of their licensing contracts, according to analysts. And large users may be able to derive better discounts when they enter into long-term agreements with CA through the subscription-based approach, they added.

But the new scheme does nothing to address long-standing and far more crucial user demands for cheaper usage-based software pricing, said Carl Greiner, an analyst at Meta Group Inc. in Stamford, Conn.

"The bottom line is that this is something that's meant more for Wall Street than for users," Greiner said. "From a customer point of view, nothing really has changed." That's because pricing will still be based on the overall capacity of a mainframe installation, he added. Discounts will also depend on the length of a contract and its dollar value -- just like before, Greiner said.

"At first blush, it certainly sounds like this will be something that makes it simpler [for users to buy software from CA]," said Richard Ptak, an analyst at Hurwitz Group Inc. in Framingham, Mass. "But it doesn't look like it is going to do a lot for [users] who are much more usage-sensitive and want to be tied into a pay-for-play pricing model."

Similar moves by Microsoft Corp. and other software vendors have met with some skepticism from users. For example, CIOs and other information technology executives said earlier this year that they're concerned about what new approaches such as subscription-based pricing could cost their companies, despite the increased flexibility compared to traditional licensing schemes.

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