SOFTWARE LICENSING

Good News for Businesses: Software Licensing Prices are Changing

By Steve Anderson, Contributing TMCnet Writer

In a move that will likely come as a surprise to several business out there, the issue of software pricing is actually changing, and in a way that many businesses will welcome thanks to the rise of software-as-a-service (SaaS (News - Alert)) starting to take over for the standard end-user license agreement (EULA) and enterprise software license in software purchasing.

Traditionally, software licenses have come in two basic versions: the aforementioned EULA and the enterprise license. The EULA is commonly meant for single users, on single computers, and provides comparatively strict terms. Consumers can make one backup copy, but aren't always able to transfer the ownership of the license. Beyond a few users in a comparatively small location, EULA licenses are tough to manage and compliance is tough to monitor. Hiring new employees requires substantial changes to licensing, and should that employee leave or company downsizes, getting rid of that now-unnecessary license can prove difficult.

The enterprise license agreement isn't much better. Though it covers larger numbers of users more readily, it can also prove problematic when companies change staffing levels. Additionally, it often requires the payment of maintenance fees that don't actually come with any maintenance beyond support that may never go used and upgrades that may never materialize. Worse, software companies audit enterprise license holders and launch what are known as “true-ups” in response, which can result in further expense for the business and, if nothing else, inconvenience.

But with the growth of SaaS, enterprise users get access to what's called the “per-user per-month” rate, meaning they can shuffle numbers as needed and simply pay out a rate based on use, almost like a power or water bill. Since the software is cloud-based, users can get new licenses and software to go with them, as needed, when needed, and then the new bill reflects these changes at the end of the month. Waste is eliminated, and companies no longer pay for licenses they don't need, saving big money in some cases.

It's easy to see why enterprise users would prefer SaaS; it's less cumbersome, requires much less of the companies involved, and reduces software expenses to a standard bill like many others, turning a capex (capital expenditure) into an opex (operational expenditure). Even software companies get benefits in no longer having to stage audits to find non-compliance; the terms are so clear all a software maker has to do is examine the checks that arrive against the number of expected users to ensure compliance.