Subscription VS Licensing in the Project Management Market
One of the biggest recent changes to the project management software market has been the almost meteoric rise of subscription-based pricing models. Even only a few years ago, in 2010, perpetual licensing was the standard for industry giants like Microsoft.
Since then however, Microsoft shifted many of its core products to cloud-based subscriptions, including Microsoft Project, though the on-premise option remains. Perpetual/licensing models remain, but subscription based models, which require companies to pay on a monthly or annual basis, are growing at a rapid rate.
So which price model can businesses use to save money? Let’s review the benefits of each.
Lower Initial Cost
In contrast to a licensing model that requires a large up-front cost, and perhaps even hardware updates, subscription-based software helps organizations more evenly spread out their costs. This allows small businesses to access powerful project management software that would have been previously unattainable.
Nucleus Research actually examined 70 case studies of businesses switching to Software as a Service applications – which is what any subscription-based project management software would be – and discovered that the ROI of these services was 1.7 times better than similar on-premise or perpetual model solutions.
If the needs of a business change – perhaps a new project manager wants to implement a different workflow – subscription based software usually allows companies to end their agreement. The most flexible solutions don’t require any contract beyond a month-to-month payment.
While businesses can stop using on-premise software at any point, they’ve likely already invested a great deal of money in the solution (remember those up-front costs?). That means if the software isn’t working out, businesses may find themselves with hefty sunk-costs.
Subscription based models are always in the cloud, so users can access their project management software from mobile devices if they do field work, or from home if they work remotely. Increasing the reach of project management software extends the amount of measurable data PMs can gather, which in turn improves their ability to calculate the ROI and maintenance needs of the project. Both of which, again, save resources.
Does the perpetual model still have a place?
With all the benefits of subscription-based models, does the perpetual model still have a place?
Yes, especially if the longer term goals of the business are concrete and the hardware infrastructure is sound. For example, although Microsoft has started offering a number of subscription-based products, they have maintained their perpetual offerings as well.
In fact, if calculated over multiple years, subscription software can actually become more expensive in relation to licensing costs. Unlike perpetual pricing, you’ll have to continue to pay the monthly subscription rate, no matter how long you use the software.
Some businesses simply want to own their software
Also, the fact remains that some businesses simply want to own their software, instead of a subscription to the service. Additionally, subscription based services may not always fulfill their promised value. In a similar software field that often overlaps with project management, 52% of users working on cloud-based customer relationship management software said they were open to the idea of switching vendors in the next six months.
Businesses who choose to remain with license based software will also have less security risks to consider, since they’ll be minimizing their exposure to the cloud.
Conclusion: Subscription or Licensing?
So which should project managers choose: subscription or licensing? Though a bit of time has passed since subscription-based software has come to the fore, the arguments remain basically the same: if you need to save money up-front, subscriptions are the way to go. If you have the funds and know your hardware and service offerings have some staying power, licensing software remains a viable option.