Software purchase vs. subscription

Johnson Reed
2m read

When looking to purchase new software for your business, your licencing and payment will likely be amongst your top considerations. With obvious pros and cons to perpetual licencing and subscriptions, it’s important to determine which model will best suit your business’ requirements.

With a perpetual licence, you pay the cost upfront and the software is yours to own and use indefinitely. If you tend not to update your software frequently, this might be the most cost-effective option for your business, providing you have sufficient capital to make the purchase outright. Implementation and support contracts would come as additional expenses, so make sure you’ve factored these into cost.

With the rise of cloud computing and SaaS (Software as a Service), it’s likely you might want to consider a more flexible licence model that allows you to adapt and upgrade your package as you go. One all-encompassing monthly or annual payment can be an attractive proposition, breaking the cost down and offering a more affordable and cash flow-friendly solution. As an ongoing agreement, any additional features or upgrades can usually be rolled into the cost on a pay-as-you-go basis, and the software company will be on hand to support you throughout the term.

Technology is rapidly evolving, so you might want to spare a thought for compatibility. For software with a long lifespan, it’s entirely possible that it may not be compatible with hardware as it upgrades and develops.

You might also wish to consider the rate at which your team is expanding and your staff turnover when considering which licencing model is right for you. Remember, your software cost is usually calculated on a per-user basis. On a perpetual licence if you employ new staff you’ll most likely need to pay an additional fee. However, if an employee leaves the company, their licence will become obsolete. On a subscription basis, users can be added and removed as you go, so your costs will always accurately reflect usage.

These are just some of the important factors your business might consider when purchasing new software, but we’d love to hear your thoughts! Please answer our poll or leave a comment below.

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