In 2011, creative software giant Adobe announced that they would begin offering their creative suite of products using a then relatively-new distribution model known a Software as a Service, or SaaS. Although many had reservations about the announcement, ultimately Adobe knew what they were doing; the move was a resounding success, and the Creative Cloud service had earned over 700,000 subscribers by the end of 2013 and building to over 8 million users today. Microsoft too has made the switch. It offers its famous Office suite of products as a subscription, and now has over 18 million subscribers. But just because the developers have found a successful new business model doesn’t mean it’s right for every one. That’s why we’re taking a look at the pros and cons of subscription-based software for license management.

License Management Software as a Service.

One of the reasons subscription-based software is so successful is because of the significantly reduced up-front costs that come along with it. Software that was once priced out of reach of individuals or small businesses suddenly becomes much more affordable on a monthly subscription. The obvious downside of this is that the overall cost over time are higher, but the story doesn’t end there. Software as a Service provides additional value that perpetual licenses just can’t match:

1. Predictable costs.
2. No wasted license keys.
3. Automatic Upgrades.
4. Moves software from capital to operational expenses.
5. Simpler maintenance for IT.
6. Lower costs through simpler management and support.

These are just a few of the reasons why subscription-based software is popular with both users and vendors alike.

Predictable costs

Perpetual software licenses are often paid once and then forgotten about. But when bought-and-paid software needs updating (and it will eventually need updating), there are sudden and large costs involved. Retraining can add to that bill even more if there have been several versions issued between yours and the most recent update.

Subscription software is a much more predictable monthly cost. It may vary slightly from month to month if the number of licenses you require changes regularly, but on the whole SaaS provides significantly more reliable and consistent costs.

No wasted license keys

Perpetual software often requires that licensing bodies purchase a specific number of keys, or provide keys in batches. This can be a waste of resources if you only need a specific number. Organizations often wind up paying for software keys they don’t use.

Subscription software on the other hand scales easily. As more or less people use the software on a monthly basis, dynamic subscriptions can change the number of licenses you’re charged for. This helps ensure your licensing body isn’t throwing away money of unused software keys.

No Need to Update, Automatic File Syncing

When it comes to perpetual software, updates can be a serious problem. They are often important, bringing with them security patches, bug fixes and more. However, it can often be difficult for IT teams to convince their organizations to proceed with an update. When support issues invariably arise, they can create difficulty if deprecated versions are no longer supported.

Updates aren’t a problem for IT departments using subscription software, though. With SaaS, subscribers are always on the latest version of their software. Plus you’ll always have access to your latest documents and files as well, as most subscription software comes with file syncing.

Moves software from capital to operational expenses

Reliable, up-to-date software is a necessity for every organization, and software is an essential part of daily operations. However, perpetual license software is a single, expensive purchase. This means it is often considered a capital expense. Moving the cost of software to a monthly operational budget helps free up funds for valuable capital investment and more accurately reflects the software’s role in a business.

Lower costs through simpler management and support

Subscription software may be more expensive in the extreme long run, but it also helps keep costs down in its own way. SaaS is easier for software vendors to track and manage licenses on. Overall costs are kept down because software companies don’t have to pass as many piracy costs down to clients. Adobe’s experience with moving to a subscription model serves as a prime example; when the company made the switch, the up-front cost became much more manageable and, according to CEO Shantanu Narayen, even served to turn some pirates into legitimate users.

Subscription software doesn’t just mitigate piracy costs. It reduces support costs as well. Instead of having to support multiple older versions, software vendors need to only support the current version. By ensuring that all users are on the same version of software through automatic updating, clients don’t wind up paying for excess technical support capacity.

The Drawbacks

Software subscriptions offer many benefits over perpetual licensing. However, that doesn’t mean they’re a good fit for licensing authorities. When evaluating if a subscription software is right for your organization, it’s important to consider the downsides as well.

More Reliance on the Vendor

One of the most concerning downsides of subscription software is the face that licensing bodies no longer have direct ownership over the software. In the event the vendor goes out of business or ceases operations for some other reason, the organization could suddenly find itself without an important part of their daily operations.

However, there is a simple solution for this problem. A reputable software vendor should be willing to include a source code escrow agreement with your subscription. These agreements mean that in the event a vendor suddenly ceases operations, your organization will get access to the source code, meaning you’ll be able to continue to use the product even after the vendor has gone out of business.

IT Governance

One of the things that the transition to software subscriptions hasn’t changed is a licensing body’s legal obligations. Licensing authorities have unique requirements for their software and data, which makes it critical that your vendor is familiar with the regulatory challenges that licensing bodies face. Simplified software license management and automatic updates are only useful if the software meets your needs. When choosing a subscription software provider you still need to make sure your vendor has the requisite domain knowledge and expertise.

Software as a Service represents a fundamental change for the better for both software developers and consumers. Reduced upfront costs have made software much more affordable for users to adopt, and given the resounding success software vendors have seen, consumers appear to appreciate the move as well.