Perpetual vs Annual vs Subscription: Which Software Licence is Best?

Software licencing can be confusing. There are different types of software licence available and there is no one-size-fits-all. Each company has its own software licencing needs and priorities….

Which type of software licence is right for me

The most common types of software licences are:

  • Perpetual software licence
  • Annual software licence
  • Subscription software licence

Sometimes there is no choice in which licence type a company can opt for. Some software is perpetual only, some subscription only and so on. However, where a choice is available, we will explain why at E2E Technologies we believe that subscription software licencing is the best option for most companies.

To begin, let’s take a look at all three types.

Perpetual software licences

The perpetual software licence is very much a traditional, or maybe ‘old school’ licence option.

A perpetual software licence is what its name suggests. The licence is purchased for a one-off, up-front cost to be used indefinitely. The developer maintains the software. The buyer might pay for maintenance separately or it could be included in the original package price.

Updates are necessary to keep the software secure and compatible with hardware and systems that have been upgraded. The original agreement might include download updates to the software which the buyer has to implement. These updates are usually only supplied for an initial period of between one and three years which could present a financial risk further down the line.

Many companies that purchase a perpetual licence find themselves buying an updated version as soon as the original requires a significant upgrade. As such, in many cases, it’s not really perpetual at all.

Annual software licences

Having an annual software licence is almost like renting it for a year. The buyer is able to download all updates and receive technical support during that twelve-month period. Once the year is up, the buyer has no choice but to pay again to renew the licence.

Subscription software licences

Companies that opt for a subscription software licence pay monthly or yearly for their licence with the option to pay a per-user fee. The buyer has access to technical support and updated versions of the software as and when they are released. There is no end date to the subscription; it is available to the company for however long they continue to pay the fee.

There has been a significant shift in recent years from perpetual software licencing to subscription software licencing. This is due, in part, to the momentum of cloud computing and SaaS (Software as a Service) solutions. Subscription software licences support the flexibility needed to keep pace with software development.

Here are some other benefits of subscription software licencing that explain why subscription software licences continue to increase in popularity:

Benefits to you of subscription software licences

Less risk

Perpetual software licences eventually become obsolete and need to be upgraded. If those upgrades aren’t implemented, updates on the software are no longer available. Running the software without the updates opens up the risk to viruses, spyware and malware that can cause extensive damage to data. Subscription software licences are continually updated to ensure that your data is protected and there are no compatibility issues.

More scalable

Subscription software licences are more flexible than perpetual licences when your company grows or needs less staff. A perpetual licence is bought for each user which can become redundant if that user leaves the company, whereas a subscription can be modified for the required number of users. Essentially, with a subscription software licence you only pay for what you use.

Cost

Rather than investing heavily up-front as is the case for a perpetual licence, a subscription becomes a fixed, predictable cost spread over time which is easier for you to manage.

Updates and maintenance

The software provider is responsible for all updates and software maintenance. This gives you peace of mind that you will always have access to the latest software, you don’t potentially have additional investment ahead of you, and you know that your data is protected.

Right to cancel

Subscription software licences can usually be cancelled with around 30 days’ notice, giving you flexibility and more financial freedom.

Get in touch

E2E Technologies can help you choose the best software licence model for your business. To find out more, please call 0151 433 3958 or contact us using our online form.


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