When Microsoft launched Office 365 in 2011, the use of software in the cloud was previously focused on likes of Google and Salesforce. Since that time, other large vendors, notably Adobe, had started to experiment with the cloud licensing model, but had not yet fully committed until later.
What does this mean to enterprises? More importantly, what is driving large vendors to pursue this strategy and what does it mean to organizations and their software managers?
Let’s first look at what this means to vendors. For vendors, subscription licensing (remember SaaS?) means predictable and consistent revenue. It also means that customers who take advantage of the subscription model (or are required to use it, in the case of Adobe) end up paying for maintenance even if they do not want maintenance, so long term revenue to the vendor increases. Some have said that Adobe’s stock price was stuck in a rut before its move to the cloud. As it moved its customers to the cloud, its stock price increased as did its revenue figures. Investors like predictability – and awarded Adobe accordingly.
This strikes me as the reason why Autodesk is making the same move. With Adobe (and Microsoft) successfully testing the subscription waters, Autodesk believes now is the time to strike and make the same move.
Vendors will say the benefits of subscription licensing for end-user organizations include not having to wait months, quarters, or years for new functionality – new functionality can be pushed out incrementally.
But what may benefit vendors may include pitfalls for end-user organizations. Let’s take a look at several common pitfalls.
- Higher cost over time. Subscription licensing means a lower upfront payment. Gone are the days of having to spend $1,000, $3,500 or more upfront for a software license. Subscription licensing means a low monthly payment of $30 or $99 a month – moving the expense from Capex to Opex. While helpful in the short term, the long-term cost of that software is going to be higher since you never acquire a perpetual right to the software and are always effectively paying for maintenance, even if you don’t need it.
- EULA concerns. Often, the move to the use of software in the cloud involves new terms and conditions for the end-user organization. Are new limitations placed on the use of the software? For instance, are there now geographic limitations, can it be used by contractors, what about shared accounts? Can it be installed multiple times for the same user. For any SAM manager having to keep track of entitlements and use, their job becomes harder.
- Shelfware. Who is monitoring use – is it being used – are more people using the software than entitled? Worse yet, are fewer people using the software than are entitled? What systems are made available by the publisher to monitor use, and in the absence of any system, what systems does the end-user have in place to monitor use? If the software is not being used, can the subscription be turned off, moved to another user – what are the options for the end-user organization?
Clearly, the software industry is going through a transition – moving from the perpetual licensing model to the cloud. Some end-user organizations are going to embrace this move more than others. For those who are working through this problem, consider the following:
- Shadow IT. Cloud use allows anybody to contract for software – in many cases, bypassing the IT department. How is that software tracked? Is it being used in accordance with the license agreement? Does the business have the ability to track the cost and effectiveness of the software?
- Is it needed? The upfront, monthly fees are more attractive than a large, upfront cost, but is that technology necessary or is there a more suitable approach?
- Licensing: The cloud introduces new licensing. Is that new license fit for your needs? Will existing processes need to be changed to ensure compliance with the new licensing model?
- Financial Visibility. While subscription pricing more easily allows charge back to the actual Business Unit, if the Business Unit is in control, who is measuring use and value?