There’s a backlash brewing in the world of software and it’s been percolating for some time. Partly due to economic pressures, fueled by the wealth of vendor and software options and enabled by the juggernaut of cloud, the way software is purchased is undergoing a radical shift.
While companies are not quite ready to cut the cord on traditional permanent software licenses, the practice has become far less attractive to a growing audience, which is increasingly opting for the flexibility of subscription-based pricing models.
PTC PLM Cloud is a new hosted subscription flexible enough to meet the changing needs of SMBs.
You don’t need a crystal ball to see where the market is headed. Market researcher IDC expects sales of cloud software, most commonly delivered as subscription licensing, to surpass $100 billion by 2018 , expanding at a compound annual growth rate (CAGR) of 21.3%. In fact, IDC is projecting that the subscription-based SaaS delivery model will significantly outpace traditional software product delivery, growing nearly five times faster than the entire software market and accounting for $1 of every $5 spent on software by 2018. By any standards, that’s a whole lot of subscription software dough.
Given how far we’ve come from a technology standpoint, it’s no real surprise that companies are ready for a new way to pay for enterprise software. As consumers in today’s mobile-friendly, app-centered world, we routinely download software tools when and where we need them without any thought to complex licensing terms or inconvenient maintenance contracts. It goes without saying that if it’s convenient to flip the switch on some new hot software capability for your personal life, the expectation is for a similar kind of seamless, pay-as-you-go experience when purchasing professional software.
Personal expectations aside, there are some credible reasons why subscription-based software delivery is a better fit for the modern enterprise. From a financial standpoint, the subscription software model is far more friendly to a company that may be resource-strapped and looking to avoid the significant upfront capital investment typically required with traditional enterprise software licenses. Moreover, a subscription software model also makes it a whole lot easier for companies to estimate the total cost of ownership of software—a practice that is now essential as more technology projects vie for funding at a time when IT budgets are at best, marginally inflated and more likely, static or even shrinking.
Flexibility is another huge motivator for a subscription model as companies strive to find better ways to deal with a rapidly changing landscape—from emerging markets and new technologies to an evolving customer base and the usual ebb and flow of business. Having access to subscription software that can be dialed up during peak periods and scaled back when times are slower is a huge asset for companies wanting to hone agility practices as a way to differentiate and bob and weave around the competition.
Buying software as a subscription also generally ensures a company stays current on the latest and greatest version instead of being saddled trying to make the most out of outdated functionality in older applications. Most software subscription plans automatically update to the most current version as soon as new functionality is released, enabling customers to bypass that painful process of deciding if and when it makes sense to make the leap to an impending upgrade.
As with any new paradigm, there will always be detractors, and the subscription model won’t be a perfect fit for every company. Some will argue that there is no sound business case for staying current on the latest software release, making a one-time software purchase a better fit. Others will contend that paying monthly fees to “rent” a software license as opposed to buying it outright can actually end up costing more in the long term, which according to experts, may actually be true in many cases when companies sit down and do the math.
Regardless of these and other objections, there is no question that the subscription-based software model is here to stay. As more enterprise software platforms transition to the cloud as the preferred delivery model, the shift toward a subscription model is inevitable. Big enterprise players like Microsoft and Adobe are doing it and leaders in the CAD and PLM industry, including PTC, are following suit, as they respond to heightened customer demand for more flexibility.
Is your company ready for the subscription software ride?
[Ed. Most often, subscription licensing is delivered as a services over the cloud. Learn more by visiting the PTC Cloud Services page.]