The Channel logo


By | Tony Lock 30th January 2006 10:54 launches software financing market

Ready for a subscription revolution?

Comment Traditionally organisations have "bought" the software they use, although the range of licensing options available can be enough to confuse anyone. However, on both sides of the IT world (vendor and customer), surprisingly little attention has been given to acquiring the right to use software on a "subscription" basis rather than on perpetual use licenses. But this may be about to change.

At the end of last year,, a company committed to setting up the first software financing market in the UK, surveyed over 100 ISVs to assess their plans regarding making their applications available on "subscription" models. The results are encouraging but do highlight some of the challenges that ISVs must tackle in order to be able to offer software via subscription licensing options.

Of those surveyed, nearly nine out of ten stated they either already offered their software on a subscription basis, were planning to adopt such a model, or were in the process of evaluating subscription licensing options. Of these software vendors, one third have used the services of a financing partner while another 28 per cent expect so do in the near future. It is interesting to note that while 45 per cent of ISVs today have the capability to deliver their software via a subscription service, only 37.5 per cent felt their organisation had a high level of familiarity with the model, and just over 20 per cent felt such understanding to be low.

Of even greater interest is that while almost half of those questioned felt there were no advantages or disadvantages to subscription licensing, 36 per cent agreed the benefits of subscription licenses outweighed those of perpetual models, with the remainder, only 18 per cent, disagreeing. Of the reported benefits associated with a subscription model, the guarantee of recurring revenue was the highest rated advantage (63 per cent), with building a better customer-vendor relationship (48 per cent) in second place. Better customer retention, increased sales, and shorter sales cycles all ranked as important advantages by around a third of vendors.

The perceived customer benefits were recognised to include lower initial project costs, reduced risk, greater flexibility and simplicity. The additional capability for customers to recognise subscription licenses as a business expense rather than a capital asset also ranked highly as a customer benefit.

A third of ISVs have already utilised financing providers to assist with subscription licensing and another 24 per cent have considered this approach with specialist software financing providers being the preferred source of funding. When it starts operations on January 30, will be keen to help address many of the inhibitors to embracing software financing models identified by ISVs, especially a lack of specialist knowledge of the software industry among finance partners, and the need for clear and transparent funding.

When launches the independent financing market place, it is hoped ISVs will take the opportunity to once again look at providing their offerings on subscription models. There is no doubt the demand for software to be supplied via subscription will continue to grow. could be well placed to help bring software subscription to many organisations, benefiting both software houses and their customers.

Copyright © 2006,

alert Send corrections


Frank Jennings

What do you do? Use manual typwriters or live in a Scottish croft? Our man advises
A rusty petrol pump at an abandoned gas station. Pic by Silvia B. Jakiello via shutterstock

Trevor Pott

Among other things, Active Directory needs an overhaul
Baby looks taken aback/shocked/affronted. Photo by Shutterstock

Kat Hall

Plans for 2 million FTTP connections in next four years 'not enough'
Microsoft CEO Satya Nadella


Suit-and-tie-wearing man tries to meditate, take deep breaths in faux yoga pose. Photo by Shutterstock
Emotional intelligence, not tech skills, is the way to woo suits
League of gentlemen poster - Tubbs and Edward at the local shop. Copyright BBC
One reselling man tells his tale of woe