Software Licensing: Subscription Management Trend 2022

The trend continues – licensing models will also be in high demand in 2022

The market for software licensing and monetization is on the move. New subscription models, some built on new technologies or enabled by monetization opportunities such as blockchain, continue to lead the way. Thales sees a boost to this trend in their daily business. The Subscription Industry Report 2021 from billwerk also illustrates this view: the CAGR (Compound Annual Growth Rate) shows a growth of 117 percent for the DACH region in 2020. So are the days of perpetual licensing numbered?

Perpetual-Licensing vs. Subscription Software-Licensing

Perpetual licenses, unlike subscription licenses, are paid in one large lump sum. Fees for maintenance, support & upgrades are not included and can therefore lead to unexpected surprises regarding the price. On the other hand, with subscription software licensing such items are billed on an annual or monthly basis and represent an ongoing subscription – with no hidden costs at all.

Cost control

By using subscription licenses, customers can plan with low initial costs because the licenses are ongoing assets that are billed over time. In addition, the cost assets are transparent and predictable. Maintenance, upgrade, support and renewal costs are included in the license fee, and services do not simply expire after a certain number of years. For vendors, subscription software licensing enables a steady and predictable inflow of revenue.

Flexibility and scalability

Subscription-based software licensing offers far greater flexibility to both the vendor and the customer, which is a great advantage. Vendors can easily offer multiple levels of service; in turn, customers can decide which subscription model best suits their needs. The scalability of the subscription solution gives businesses the flexibility to grow. Subscription models can be upgraded or downgraded as customer requirements change, and new functionality can also be developed on-the-go.

Increased customer loyalty

A sustainable and trust-based customer relationship with high customer lifetime value (CLV) is essential in the age of digitalization, because it has never been easier to find comparable alternatives than nowadays. Subscription software licensing enables a long and close customer relationship between vendor and customer. Providers can respond better to customer requests and implement customer wishes faster and more precisely.

Speed & security

Subscription providers that also use a cloud or a SaaS model can quickly innovate and bring new services to the market. The “go-to-market” is agile and enables immediate customer feedback. Subscription models also offer better security and a more stable IT environment. In this model, the software is hosted on the provider’s servers. A win-win situation for provider and customer.

Conclusion

The licensing experts at Thales assume that subscription-based licensing models will represent the dominant business models in the future. Perpetual licenses will play a rather subordinate role in the future – in addition to subscription software licensing.

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