By David SimsIpswitch’s (News - Alert) Network Management Division has recently published a fine study on licensing practices in IT management -- coincidentally enough, titled “Licensing Practices in IT Management.”
Licensing is an integral part of the software business as vendors typically sell customers the right to use their technology, the study finds, adding that “the intellectual property continues to remain vested with the vendor.”
The goal, then, “is to develop a balanced approach where the software vendor can maximize economic gain, while delivering equivalent value to the customer at the price point offered... In order to accomplish this – vendors need to be creative about how they license their software.”
There are two licensing models the paper looks at. Perpetual licensing models “typically include a one-time fixed cost to acquire a base product and then additional pricing for higher levels of usage – or what can be termed as the ‘scale factor’. Often the scale factor is already worked into the cost of the base product through tiered pricing – allowing its use up to a certain number of licensing units.”
In this model, then, the annual maintenance charges pay for the cost of technical support and also provide access to new version releases without additional license payments, as the study explains.
There is also the subscription licensing models. They’re term limited and “mostly driven by the scale factor – though there may be an associated upfront cost in the first period of subscription in some instances. Cost of technical support is typically included in the monthly or annual subscription cost.”
The paper also looks at a range of licensing practices, far too many to adequately explore here. Some examples:
One price, unlimited use: This is the simplest form of licensing that charges one base price regardless of the volume of use. This model is prevalent in the low end of the price spectrum as it does not sufficiently support the economics in situations beyond a few licensing units.
Tiered price, scales by device: The next evolution in the licensing model is still simple and yet provides a good balance of economic gain and value to the vendor and the customer respectively – a perfect situation of win-win.
Tiered price, scales by sub-components: At the next level, while pricing is still tiered, the scale factor becomes more complex and is based on sub-components of devices.
Instance based licensing: If multiple copies of a management application are run, each separate instance is charged at a negotiated rate for the base product.
