Usage-Based Software Licensing Offers Major Benefits to Developers

Software developers have a number of choices when it comes to licensing their products to enterprise and consumer markets. One of the fastest growing trends in the world of software development is usage-based software licensing. Instead of a perpetual license, which grants the purchaser a license to use all of the features on that version for as long as they wish, as often as they wish, usage-based licensing allows customers to only pay for the features they actually use, when they use them.

Some developers question whether usage-based licensing is actually a cost-effective means of bringing their product to market. After all, enterprise level software can cost thousands of dollars for a single license, and developers fear that they stand to lose substantial profits by moving to a pay-as-you-go model. However, billing customers based on the software features they actually use presents a number of advantages for developers — not the least of which is the potential for increased revenue.

Benefits of Usage Based Software Licensing

software purchase agreement

Usage-based licensing allows developers to reach a broader segment of their target market — or even extend beyond their normal market. Some businesses may not be able to bear the cost of a perpetual license for a program that they will not use regularly, or can’t justify the cost of a piece of software that only offers a few vital functions. With usage-based licensing, companies can mix and match software based on their needs and only pay for what they use, which represents major cost savings. In the end, the customer gets the software they need, while the developer gets a new customer.

Such an arrangement has the potential for greater earnings for the developer. While perpetual licensing only provides payment initially, usage-based pricing represents a steady stream of revenue for the developer. Combined with the increased market share, this ongoing revenue represents significant earnings potential for developers.

Earnings potential is increased by the improved research and development opportunities that usage-based licensing represents for software companies. When users only pay for the features they use, developers can easily see what their customers need and want from the program, and identify areas that need further development. They can also identify the areas that may be contributing to losses. There is no need to spend more time and money developing a feature that is rarely used, for example. Developers can more effectively direct their efforts and make their products more appealing with this keen understanding of what customers actually want.

licensing software

Finally, usage-based licensing helps combat an ongoing problem within the software industry: piracy. Software piracy costs developers more than $3 billion every year, primarily in lost sales due to unauthorized copying. Perpetual licensing makes it much easier for individuals to make unauthorized copies of software, as once they purchase the program and licenses, there is little follow-up monitoring as to the program’s usage. However, the pay-per-use model requires usage monitoring, such as that provided by SafeNet embedded software monetization, which prevents individuals from making and using unauthorized copies of programs.

Drawbacks to Usage-Based Billing

Of course, there are some drawbacks to licensing software on a pay-per-use schedule. One of the biggest concerns is the fact that such a model requires usage monitoring to ensure correct billing. However, there are simplified solutions that make monitoring relatively easy and ensure that developersare paid for their hard work.

Another drawback is that some businesses are simply unwilling to allow their usage to be monitored. Privacy and security are top concerns of many companies, and the notion of a software developer monitoring their machines for software usage raises some questions. However, most monetization and usage monitoring programs transmit data anonymously, collectively and above all, securely.

The ever-increasing costs of doing business and the growing reliance on technology to manage nearly every aspect of a modern business means that companies of all sizes are looking for ways to maximize productivity while keeping costs in check. Usage-based software licensing is one case in which everyone wins, giving businesses affordable access to the programs they need while also ensuring developers reap the rewards of their hard work.

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