Global Market Outlook on Software Licensing Model

The global software licensing market is expected to grow at a CAGR of 8–9 percent to reach $14–15 billion by 2023.

  • About 80–85 percent of the existing, as well as new suppliers or entrants, will offer subscription-based licensing models by the end of 2020
  • SaaS is becoming a mandate for software suppliers to be included as an option to remain in the market
  • Pricing will become competitive, and licensing policies will become effective, due to rapid technological development and increased demand
  • About 35–40 percent of the applications will be delivered as installed software, thus avoiding the necessity of explicit installations
  • The existing licensing models are suited in the current scenario, but customer requirements play a vital role in choosing the best-fit for the organization
  • Majority of the suppliers uplift an annual maintenance renewal of 20–22 percent. This is purely dependent on the requirements

Software Licensing Metrics

  • Suppliers often play with metrics to create a win–win situation for customers as well as themselves. Factors considered for the following metrics are the standards, whether the right metric has been mapped with the product, cost-effectiveness, reasonable pricing for the customers, and value for price & features.

Evolution of Software Licensing Models 

Current Models

  • Considering the customer’s demand and interests, three models currently exist in the market
  • The models are perpetual, subscription based, and consumption based

Mix and Match Models

  • Models that took investment, cost-effectiveness, and usage analysis into account
  • These models usually create a win–win situation for both customers and suppliers

Conventional Supplier–Client Models

  • This forms the basic foundation for all software licensing
  • Started with purchasing licenses per user, followed by multiple users and time limitation
  • Catering to increased demand and software usage, suppliers started to bring variety to meet the required demand

Partnership Models

  • Customers are provided unlimited access to the software
  • These models enabled effective long-term commitments

Grouping and Rental Models

  • With simpler pricing quotes for various groups (by users, by systems, etc.), these models tried to bring cost-effective solutions to customers
  • Rental models recorded the usage and billed the required amount to customers