Firms opt for pay-per-use licensing to avoid waste

Survey confirms a move away from the long-held preference for perpetual licences in favour of subscription models

Figures from a global IDC survey have confirmed that organisations are increasingly opting for subscription or usage-based licensing of software purchases as budgets remain tight.

The research, covering 1,828 respondents, including 430 enterprise and 1,398 application producer respondents, found that the need to reduce waste and cost was a main driver.

"Organisations are looking for relief," the associated report said.

"Trends are clearly moving away from the previously ubiquitous perpetual licensing model towards subscription and usage-based. Fewer than half of organisations said the majority of their software estates use perpetual licenses. In 12 to 24 months, this percentage will go down to 36 per cent."

Twenty-four per cent of respondents in the Flexera-sponsored annual survey indicated a preference for subscription licences, and that within two years, the proportion of subscription licenses within their organisation could rise to 26 per cent.

Seventeen per cent said most of their software estate used pay-per-use licensing – a figure expected to rise to 18 per cent in 12 to 24 months, the report said.

"They are increasingly implementing best-practice processes and tools to uncover waste in software spend and optimise their software licences. And they are also looking more closely at how they pay for software," it said.

Forty-one per cent of the enterprise respondents were from larger enterprises turning over $1bn (£620m) or more a year, and 14 per cent were from companies boasting revenue of $3bn per annum.

Sixty per cent of the application producer respondents represented companies reaping $10m or less per year, and three per cent were from companies with $1bn or more in annual revenue.

Almost two thirds of enterprise-based respondents indicated their software budgets will either level off or shrink over the next two years. Forty per cent said budgets will stay the same, and 23 per cent said their budgets will shrink over the next 18 to 24 months. Only 37 per cent reported that their budgets are expected to rise over the next two years.

At the same time, enterprise participants also reported they were discovering "substantial pools" of unused software within their organisations. Ninety-six per cent said they had at least some of this "shelfware".

Thirty-nine per cent of them indicated that at least 21 per cent of their software spend had been on shelfware; 30 per cent estimated that 11 to 20 per cent of their budget had been thus wasted.

The IDC/Flexera report, 2013-14: Key Trends in Software Pricing and Licensing Survey – Software Budgets, Waste & Shifts in Software Licensing, was released under the auspices of IDC's software licensing and provisioning research team led by analyst Amy Konary.