Are SaaS & recession killing perpetual software licenses?
Danube Technologies Inc. is a small maker of software tools for Scrum and agile programmers. While Danube's technology and audience is cutting-edge, its licensing model is old school.
Several weeks ago, the Redmond, Wash., vendor switched from selling subscriptions to its software back to selling perpetual licenses.
"We're not doing this on a whim," said Danube co-founder and CTO Victor Szalvay. "But based on the feedback we got, our customers aren't keen on the subscription approach."
That may seem surprising. Subscribing to software requires much less upfront investment than buying license for it, just like renting costs less upfront than buying.
The subscription model has also been boosted by the increasing popularity of software-as-a-service and open-source software, both of which typically use subscription licenses rather than perpetual licenses. For enterprise software, a perpetual license typically involves an upfront fee plus an annual maintenance fee of 20% to 25% for patches and upgrades.
Even Microsoft Corp., the most visible champion of perpetual licensing, is starting to embrace subscription models as it adds more Web-based services.
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Perpetual licences can be good for startups
I like the comment that the purchasers sometimes prefer the security of supply that can be facilitated by perpertual licences. I notice that most startups seem to have a strong preference for subscriptions, even if that means they are raising more capital to provide them. I wrote about this in more detail: economics of software as a service, in particular suggesting that early stage companies look at their cost of capital before deciding their licensing models.