Changes ahead for software licensing says IDC -- ADTmag

Changes ahead for software licensing says IDC

By ADT Staff
March 24, 2004

Customer demands to change corporate software licensing methods are being heard, according to industry analyst firm IDC. According to a study conducted by IDC titled "The Future of Software Licensing," “the floodgates have opened” for software licensing change.

More than half of enterprise software vendors are likely to alter their licensing models in the future, says the group. Recent reports indicate that bigger corporate customers are pressuring vendors to change the way they sell software. [See "License to Ill," ADT, Jan. 2004.]

IDC expects vendors will be driven to make changes by financial motivations, industry dynamics and customer demands. But change will be difficult. In the study, 75% of participating software vendors' aggregated software revenues were associated with perpetual vs. subscription licensing methods, said Amy Mizoras Konary, program manager for software pricing, licensing and delivery at IDC.

Customers and vendors in the IDC study are considering a move toward subscription licensing, rather than the sometimes onerous perpetual licenses that grew up along with the software industry. IDC estimates that 43% of software vendors and 26% of customers believe that the majority of worldwide software revenues will be derived from subscription-based software offerings by the year 2010.

Complexity of multi-license management and a desire for better estimation of the business value of software are also likely to drive change. IDC's study revealed that medium- and large-sized software customers are managing an average of more than 40 software contracts; in addition, 70% of these customers expect the complexity of managing these contracts to increase.