With the advent of cloud computing, there’s been a shift in how software is sold. In the “old days”, software was purchased outright, as a license. The license gave the purchaser the right to install the software and use it – usually into perpetuity. The support that came as part of the license usually included patches, but generally not upgrade rights.
Generally the license allowed for the software to be loaded onto a certain number of machines, and upgrades were chargeable.
So, for companies using the software, the costs included the platform, the license, and upgrades as time went by. If the company decided not to upgrade the software, they would not incur those costs; they could continue using their original version.
Software companies, some years ago, began offering software sold as a subscription. Instead of one up-front cost for the licenses, it was a monthly cost. Generally, the subscription includes upgrades, but the use rights only persist as long as the monthly subscription is being paid. In this scenario, the costs would be the platform, and cumulative monthly cost of the subscription(s).
More recently, a third model was introduced – subscription to access to the software from the cloud. In this model, the monthly subscription entitled the users to access from almost any web-enabled device. The software is always up-to-date, because it’s running on a server maintained by the vendor. In this scenario, the only costs are the monthly fees. It’s important when considering this option, however, to verify the web version of the application has all the features of the installed version.
How Do You Choose the Best Option?
So which is best? As with all things technical, the answer is: it depends.
If your company typically doesn’t consider software updates important, and is content to use the application as is for more than 4 years at a stretch, purchasing the software and installing it on your own server probably has the lowest total cost of ownership (TCO).
If updates are important – if you prefer to keep your applications at their latest revisions, then the subscription model may be a better deal for you, from a TCO standpoint. Or, if you don’t plan on using an application more than a year or so, the subscription model may make more sense, since you won’t be have time to spread the cost of installed software over a longer period of time.
If the features you need in the application are present in the online version, then that may be the way to go.
Calculate Your TCO to be Sure
It’s not difficult to compare the relative TCO for each option. Factor in the obvious – the cost of the software, whether purchases or as a subscription – over a period of time, like 3 or 4 years. Factor in the less obvious: cost of the platform, cost for support, and cost for training. Your company’s cash flow situation should be a factor too. Sometimes, the option that actually costs a little more over a 4 year span could be more desirable if the upfront costs for a server and software is an issue.
The good news is, it’s great that you have these choices. Every company utilizes their technology in different ways, and we are fortunate to be in a time where there is so much flexibility in how we apply these technologies.
An IT consulting firm, like Clare Computer Solutions, can help you evaluate your choices, and then once you’ve made a choice, implement, and maintain the tools you choose. Contact us today to get started!