Over the last few years, software licensing has shifted from perpetual device-based licensing to user-based subscription licensing. Scott Berry, Managing Director at Applecore Designs Limited, has gone one step further and introduced a bespoke fixed term software agreement for his clients.
Scott explains,“Rather than approach the market from a seller’s perspective, we are looking at things from the buyer’s point of view. Our clients tell us that a perpetual licence with a payment plan offers better value for money than a subscription.”
With a perpetual licence clients buy the right to use software for as long as they wish, in exchange for an up-front payment. The vendor usually requires the client to upgrade the software as necessary and may stop providing support for older versions. But the decision about when to stop using the software rests with the buyer. A maintenance fee is charged in the perpetual model to cover the cost of bug fixes enhancements and version upgrades.
A subscription licence, in contrast, requires the client to pay a fee for each period (month or year) that the software is in use. Use of the software ceases when the payments end. What attracts vendors to the subscription model is what repels most customers; subscription fees increase over time. In addition, for the client there is no asset at the end of the agreement period and management of client accounts is often cumbersome.
Some vendors of Building Information Modelling software have adopted a subscription model and in some cases no longer offer a perpetual licence option.
Fixed Term Licence
Applecore Design’s research has revealed that, in most cases, large studios almost always prefer perpetual licencing. These studios generally look to purchase from their current cash flow and can depreciate their investment, whilst obtaining full product upgrades and support via maintenance fees.
“Small to medium sized studios also have the same preference,” says Scott, “except when a software purchase represents a large proportion of their cash flow or retained profits, in which case, spreading the cost looks attractive.”
It was clear to Scott that Applecore Designs needed to add options to their existing portfolio. Our new fixed term perpetual licence model has been introduced in response to today’s ever-evolving software landscape.
What are the main differences?
Furthermore, with their three year fixed term software agreement they are offering an ARCHICAD Teamwork licence with 36 months full product upgrades/support for £199.00 + VAT per month. From month 37 onwards, transfer of title is automatically obtained with the licence dropping to maintenance mode (full product upgrades and support) at the current rate of £695.00 + VAT per year.
Comparing the current market, Scott researched the total spend by product. He initially compared Autodesk’s Revit Monthly Subscription to Applecore Designs’ fixed term ARCHICAD® licence.
Comparisons were made on a month by month basis with AutoDesk’s Revit Monthly Subscription shown in red and Applecore Designs’ fixed term ARCHICAD licence agreement in blue.
After three years, Applecore Designs’ ARCHICAD Teamwork licence agreement is £900.00 cheaper than AutoDesk’s Revit subscription. But more importantly, the user then owns the ARCHICAD licence for no additional fee.
The total spend over six years is significantly higher with AutoDesk’s Revit Monthly Subscription. The gap of £7,635.00 between the options could be used to finance other purchases or services within a business. The misfortune is that so few businesses calculate the long-term investment and simply consider the initial monthly payment.
Scott commented, “With ARCHICAD licensing, we are providing our clients with the benefits of owning licences over a fixed term period whilst nullifying the long term constant cost associated with subscription”.
For more information about Applecore Designs’ fixed term ARCHICAD licence, click here.