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Enterprises 'flee' perpetual software licensing but still suckers for 'shelfware'

Antony Savvas | Oct. 23, 2014
Software suppliers are offering a greater variety of licensing models as they 'see the writing on the wall'.

Enterprises are "fleeing" the perpetual software licence model due to shrinking budgets, but "shelfware" is still rampant with 96 percent of organisations wasting money on unused software, according to research.

The Flexera Software Key Trends in Software Pricing & Licensing Report has been prepared jointly with analyst IDC. Almost a quarter of those surveyed (24 percent) said the majority of their software estate today is based on subscription licenses. And in 12-24 months this percentage will rise to 26 percent, says the report.

For the 17 percent of respondents using usage-based licensing models, this percentage will rise to 18 percent in the next 12-24 months. Only 45 percent of organisations today say that the majority of their software estate is deployed using perpetual licenses. In 12-24 months, says the report, this percentage will decline to 36 percent.

"It doesn't always make sense to pay up front for the full cost for software before the application has proven its value to the organisation," said Steve Schmidt, vice president of corporate development at Flexera Software. "In their drive to increase efficiency and cost effectiveness, some organisations prefer to pay for software in ways that allow them to better align their costs to value.

"That might mean paying over time via a subscription model, or by the features, functionality or capacity that they're actually using, via a usage-based model."

And software suppliers "see the writing on the wall", says the report, as they are offering a greater variety of licensing models. Only slightly more than a third of producers (35 percent) say that the majority of their annual software licence revenue now comes from perpetual licences. Nearly a quarter - 22 percent - say a majority of revenue comes from subscription/term licensing. Nine percent say a majority of revenue comes from usage-based licensing.

"Having the ability to identify customer needs and licensing model trends, and then quickly respond with new licensing options can give producers a significant competitive advantage," said Schmidt.

Ironically though, despite shrinking budgets and the pressure on enterprises to seek greater value from business software, the report reveals that almost all organisations are wasting money on software that isn't being used ("shelfware").

The report found that 96 percent of enterprise admitted that at least some of the software they've purchased is shelfware. A significant percentage - 39 percent - report that 21 percent or more of their enterprise software spend is wasted on shelfware. And this waste takes place even though almost two-thirds of enterprises (63 percent) say their software budgets will either stay the same or shrink over the next two years.

"It's very easy for shelfware to accumulate when organisations don't proactively implement best practices and technology to track, manage and optimise their software estates," said IDC analyst Amy Konary. "Enterprises must have the ability to continually identify where software licences are deployed, how those licences are being used, and reconcile that data with the complex set of rules contained in the licensing agreements.


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