The shift to subscription models has been driven by the adoption of cloud computing solutions. During the last years we´ve seen how the subscription option replaces the capital outlay of purchasing perpetual software licenses with an ongoing payment model that makes software adoption more affordable. Read also "5 tips for tackling cloud migration".
But in this new year 2023, we may see how the evolution towards the cloud takes a step back in search of cloud cost optimization; in other words, in previous years companies were not getting the expected return on value that many thought that cloud computing would bring.
So, does it make sense to move from a perpetual model to a subscription model? What are the main differences between a subscription and a perpetual license? Like any pricing decision, you must know all the costs before you can determine the best strategy.
Subscription licenses were introduced with Data Protector Premium 11.01 and Data Protector for Cloud Workloads 5.0 to address new market trends and customers’ requests for a more flexible approach when choosing the backup solution. It can be considered as “renting” a software license month-to-month or year-to-year basis. With this subscription model, customer pays a monthly or annual price that includes software, updates, and technical support.
An advantage of subscription license is its lower initial acquisition cost. Typically, small businesses tend to choose subscription-based licenses as it is a way to start operations with a cost that is more adjusted to their capabilities, but large companies are also adopting this model as a way to get rid of additional fixed expenses.
Roughly, the break-even point for subscription license versus perpetual license is about 3 years. This will mean that customer may have subscription license for 3 years, allowing them to spread their costs over the same period as a perpetual license purchase.
Another advantage we can find is the creation of stronger relationships as subscription model relies on continuous updates based on customer feedback and the agreements must be reviewed in the short or medium term. With perpetual licenses, customers can hold the license and access the product indefinitely. However, in many cases and due to the lack of communication, customers may not have access to the latest features or news and lose part of the benefits that the solution can provide. Read also "How to avoid hidden costs, other cloud 'gotchas'".
On the other side, perpetual licenses have been the standard approach for more than 30 years within the Data Protector portfolio and they are still there for different reasons.
Although perpetual software licenses may have a higher initial cost, a perpetual license is likely to be the most cost-effective option if customer plans to use the specific software solution for the long term, and when it comes to backup and recovery, medium- or long-term approaches are quite common as data must be kept for long periods.
When it comes to complex environments, perpetual licenses can give the customer the option to create ad-hoc solutions and select what works best, also including professional services that best adapt the product to their needs. In many cases, cloud backup and subscription offerings have very limited flexibility to address individual needs and tend to become a common proposition for any customer regardless of their needs.
While a subscription licensing model provides better affordability with a predictable payment schedule, it may cost more over time and if customer don´t renew the subscription, the software will stop working altogether (whereas a perpetual license will keep working on the same version).
In addition, some subscription services that at first seemed cheap, have increased costs steadily every year. When you opt for a perpetual backup software license, you are designing and investing in a medium or long-term solution; with a clear objective and that will not need to be reassessed in the short term since its life cycle is usually 3 to 5 years.
To be or not to be
As we have seen above, there is no right or wrong answer when talking about perpetual or subscription options – only what is right for customer´s business.
So which could be the best? The decision will depend on different factors like financial decisions, customers´ needs or market environment as there is no difference with regards the functionality of the software for the two licensing methods.
That´s why Micro Focus allows customers to choose whatever model that best suits their needs without pushing them in any direction. Data Protector provides as much as possible flexibility to fit into customers strategy.
With the introduction of Data Protector 11.01 and the launch of the subscription model, we are bringing new options to certain industries such as service providers, who rely on Data Protector as their preferred backup solution and gain greater flexibility in offering it as a backup-as-a-service solution to their clients. In addition, and with the release of Data Protector 11.02, an enhanced Role Base Access Control feature has been implemented that, together with the licensing flexibility, will make Data Protector much more powerful for new age needs.
Information on how to upgrade to the latest version of Data Protector can be found here.
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The Micro Focus IM&G team
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