Software industry moves to subscription licensing

Software licensing is entering a period of "dramatic and fundamental change" as publishers aggressively move to subscription models, newly unveiled research has claimed.

The study, Key Trends in Software Pricing and Licensing, sponsored by Macrovision in co-operation with the Software & Information Industry Association (SIIA) and the Centralized Electronic Licensing User Group, found that one in three respondents is offering subscription-based licensing as their primary pricing model.

Half of respondents in the September 2004 poll of 500 software industry executives and their corporate customers said they expected to be offering a subscription model by 2006.

However, enterprises indicated that they prefer perpetual to subscription pricing by two to one, leading the study to note that this discrepancy between software vendors and their customers could form an expectation gap between them in the future.

The most prevalent pricing models in use today were found to be 'per concurrent user' and 'per seat', but pricing models based on metrics are rapidly gaining popularity.

By 2006, roughly half of all respondents expect to offer pricing based on metrics such as 'number of uses', 'transactions' or 'time used'.

The study also found that licensing enforcement is going digital as software vendors move away from non-technical forms of licensing enforcement and towards electronic, digital and internet-based processes.

Today, almost half of software providers are enforcing licensing primarily through electronic means; in two years that number is expected to increase to 62 per cent.

"It is clear from this study that the software industry is in the midst of a period of dramatic, fundamental change," said Ken Wasch, president of the SIIA.

"We believe the emergence of new business models and technologies will deliver tremendous benefits to both software providers and buyers, as well as play a vital role in maintaining a healthy and vibrant industry for years to come."

Dan Stickel, executive vice president and general manager of Macrovision's Software Technologies Group, suggested that the results highlight that, while some changes are being embraced by both sides, others are still in a period of flux.

"As these technologies and business practices reach new levels of adoption and maturity, we expect to see a very tangible improvement in the relationships between software publishers and their customers, as well as in their ability to maximise the value of software," he said.