The lines are blurring between software and services — with the rise of cloud computing, that trend has accelerated faster than ever. But customers aren’t just looking at cloud business models, such as software-as-a-service (SaaS), when they want more flexibility in the way they license and use software. While in 2008 upfront perpetual software licenses (capex) made up more than 80% of a company’s software license spending, this percentage will drop to about 70% in 2011. The other 30% will consist of different, more flexible licensing models, including financing, subscription services, dynamic pricing, risk sharing, or used license models.

Forrester is currently digging deeper into the different software licensing models, their current status in the market, as well as their benefits and challenges. We kindly ask companies that are selling software and/or software related services to participate in our ~20-minute Online Forrester Research Software Licensing Survey, letting us know about current and future licensing strategies. Of course, all answers are optional and will be kept strictly confidential. We will only use anonymous, aggregated data in our upcoming research report, and interested participants can get a consolidated upfront summary of the survey results if they chose to enter an optional email address in the survey.

Understanding new, more flexible licensing models is one thing — transforming and moving a company’s business over to these models is something totally different! Revamping pricing and licensing is the most sensitive and business critical change a company can do — it can literally make or break the company. Moving from perpetual licensing to subscription deals will have strong negative impact on revenue recognition that needs proper planning and most important – excellent communication with all shareholders. If you listen to the market, you’ll see which way software customers leaning in terms of seeking more contractual flexibility. They want the flexibility:

• To scale up (and down!) the usage (and cost) of software without new, detailed negotiation.
• To shift the usage between different products from the same vendor.
• To adjust the software usage in case of M&A activities.
• In payment terms and financing models.
• In sales channels and deployment models.
• In different maintenance options.
• In depth and breadth of additional software-related services (and associated costs).
• In appropriate pricing metrics that reflect real business value.

Thank you for your support in completing the survey (here again the direct URL: https://www.surveymonkey.com/s/YK96MVD). The software market is in an exciting phase of transformation. Stay tuned for more information on ongoing and upcoming research on this topic.

Please leave a comment or contact me directly.

Kind regards, Holger Kisker