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Usage-Based Licensing About More than Cost Savings

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Usage-Based Licensing About More than Cost Savings

August 15, 2013
By Mae Kowalke, TMCnet Contributor

The usage-based licensing model is one of many possible software licensing models that developers can leverage, but with it also can come a whole new software usage paradigm. This paradigm can drive new processes for clients and deliver added income for the software developer.

“On the surface it sounds straightforward like another option, and it is,” Cris Wendt, principal strategy consultant at Flexera Software, noted in a recent video. “But in a few cases, what we found is that customers have actually found a dramatically new and better way to go to market.”

Typically, business like usage-based software licensing because it has the potential to lower software costs. Instead of buying more software than it needs, a business can pay only for what it actually uses. This sounds like a perfect recipe for less software spending.

Developers don’t necessarily lose revenue from such licensing, however. That’s because the model can expand the overall pie.

This is exactly what Flexera found with one of its clients that develops software for the electronic design automation market. A customer approached the developer about a usage-based licensing situation, and the developer agreed to try it out. This gave the client access to the full range of software offered by the developer, but on a pay-per-use model.

“What the engineers found is that in a world of basically unlimited resources, they found new ways to work,” said Wendt. “They were able to do more simulations, they were able to take advantage of compute farms, and they used a lot more simulation than they thought.”

At first the CAD manager was surprised and worried about the extra software use, because the new model actually increased the company’s software spending. But it also changed how the engineers worked, and this helped them bring the product to market sooner.

Image via Shutterstock

“This was a case where a new license model wasn’t just about making a little more money, but it was about going to market differently and possibly obtaining a competitive advantage,” noted Wendt.

At the end of the day, the supplier of software got more money and the enterprise paid a little more, but this added software cost made sense for the business because the benefits were worth the additional cost.

This is instructive because it highlights that different models can have a big impact on how things get done, not just cost savings.

“So as you contemplate different license models, especially pay-per-use and usage-based pricing, don’t just think about it as an option, but think about it as a dramatically new way of going to market,” advised Wendt. “This may not work with all software, but think about how you could truly take advantage of it to revolutionize your business.”

Edited by Blaise McNamee

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