Skip to main content

Get to know this year’s hottest software licensing models

(Image credit: Image source: Shutterstock/TechnoVectors)

There is one thing nearly all businesses have in common. Across all industries, companies are looking to sell their products and develop their business – no matter what, or to whom, they’re selling. In such a competitive market, organizations need to differentiate themselves from the competition, and in 2020, that means prioritizing the customer experience by developing innovative digital features.

One of the most effective ways of making sure you have the necessary flexibility to innovate and keep customers happy, is through software licensing. Done right, cutting edge software licensing will enable the business to capture new sources of revenue, while keeping your existing customers from churning.

Software licensing is, ultimately, the gateway to subscription-based billing models, fueling digital transformation and securing recurring revenue – all while serving to diversify and personalize your products. Here, we’ll take a look at which software licensing model is the best fit for your business.

Subscription-based licensing

A subscription billing model aims to completely revamp the customer relationship. Instead of buying your product once, and never interacting with the business again, they subscribe to your service. This model can be as granular and personalized as you need, with businesses now able to offer customers daily, weekly, monthly, annual subscription solutions, letting users choose what works best for them.

This is the most straightforward path to the golden egg of profit – recurring revenue. Subscription-based licensing creates an ongoing relationship with the customer. This model involves fewer big peaks in customers, which some businesses might rely on, however it enables you to upsell, cross-sell, offer new variations of the product, and create new entitlements simply and effectively. Users love this adaptability, as it keeps payments small and predictable, boosting trust, satisfaction, and loyalty.

What’s more, subscription-based licensing gives businesses much-needed visibility into consumer spending patterns. You can quickly identify problems, such as churning customers, earlier than before as well as offering smaller businesses the opportunity to acquire better value critical support software.

Cloud-based licensing

Businesses around the world are unlocking digital transformation with cloud technologies. Cloud-based licensing models are becoming more popular, offering businesses the chance to host software in the cloud, saving customers the costs of IT, infrastructure, and hardware. Cutting the cord between hardware and software, this model enables simpler upgrades with fewer headaches for customers.

In a connected world, where users are rarely stuck behind a desktop computer, cloud-based licensing lets users access your software from any device, any time there is an internet connection. As a result, cloud-based software boosts agility, enabling businesses to offer instantly accessible products, features, and packages.

Plus, with cloud-enabled access to data, you can use real data on how your software is being used to help map out business decisions, such as pricing and marketing strategies. To power this transition, the most important thing is to make sure you partner with a reliable and trusted cloud partner. Migrating new and existing data sets to the cloud can be costly if you make mistakes – while an increase in connected devices on the cloud can open new security vulnerabilities and attract hackers.

Concurrent licensing

When selling software, your customers often need to purchase more than one copy of your product, particularly if it’s something they want to roll out across their business. In the era of remote working, concurrent licensing is a useful way of managing this, as it allows a group of users to share multiple licenses, so that businesses can buy and manage bulk license purchases. Additionally, by adopting a concurrent model, you can update any software in existing licenses that can’t cope with remote working – providing the extra flexibility that’s required to operate in today’s business world.

Concurrent licensing shows customers you are committed to servicing their unique needs. As a result, this model makes you a partner in your customer’s growth, integrating your software into their core operations. In turn, this will make customers less likely to churn, while also plugging a high-risk area for revenue leaks – unauthorized use – by offering a simple way to obtain multiple software seats.

Feature-based licensing

This model refers to licenses that customers can buy which split up your software into feature-specific products or packages. Combined with subscriptions or concurrent permits, feature-based licensing is hyper customizable and enables customers to exclude aspects of your software that they don’t need.

Think of feature-based licensing like a burger van, which allows you to choose the fillings you like most. With this type of licensing, you can charge separately for the bacon, the cheese, and the burger, thus allowing your customers to build their own meal, rather than being forced to buy the whole package.

Feature-based licensing onboards new users, who don’t want to pay for bundles of software that does not meet their specific needs. While it may seem that a feature-based approach would lower the value of your bundles, it actually enables vendors to dissect software offerings and monetize features individually or in packages, driving new revenue sources. As price adjustments are more targeted and customizable, you can also create niche features to generate profits within certain sectors or verticals.

You can even test features when rolling out software on a feature-based license, offering it free of charge or at reduced rates to attract customers. This is a useful and cost-effective method of product development, as it enables you to plan software upgrades and new versions based on real feedback.

Seat-based licensing

Seat-based licensing limits specific features to a select number of users. For instance, a customer may buy 100 licenses of your CRM software, but only 10 seats can access the email marketing feature. With this model, you can make premium features available to specific users or at certain times – enabling you as a vendor to increase the value of your more niche offerings and monetize them accurately. With accurate pricing, you’ll keep customers happy and stop them looking for better deals elsewhere.

Additionally, seat-based licenses are useful when targeting enterprise-grade customers, as these allow you to diversify your product, so that it is more valuable to more customers. With enterprises constantly looking to streamline their budgets, this option gives them access to the features they need at lower cost. Ultimately, a seat-based approach to licensing is useful for business that offer premium features to their customers, as it makes sure these features are competitively priced and attractive.

Offline licensing

Even though we live in a connected world, sometimes we need to access software in locations where there is no internet connection. Network Commuter Licensing solves this issue, offering clients full access to your company’s software, even when they are offline. Offline licensing agreements are key when connecting with huge industries that rely heavily on remote connectivity – the oil industry is a standout example here, as oil rigs need to maintain access to software out in the middle of the ocean. Operating far off the grid, industries like aerospace, energy and transportation are massive drivers of revenue for software vendors, as secure and trusted enterprise-grade software is hard to come across.

Ultimately, with digital transformation taking place on a global scale, there’s a software licensing model for every type of business, across all industries and verticals. The question really has moved beyond “if” software licensing can help expand your company to “which” model is best suited for your growth. By assessing the pros and cons of the six licensing models set out above, you can discover which model can be best adapted for your business, helping you pave the way to software success.

Jamie Longmuir, Regional Sales Director, UK, BeNeLux & Nordics, Thales (opens in new tab)

Jamie Longmuir is Regional Sales Director, UK, BeNeLux & Nordics at Thales.