Subscription licensing gives you the ability to balance (lower monthly cost) long-term licenses, with (higher monthly cost) short-term licenses for each application. The actual cost effectiveness of yearly subscriptions decreases if the licenses are idle from long periods of disuse. However, the cost-effectiveness of a short-term license increases if used for a maximum of their license period and purchased on an as-needed basis.
Figure 1: Sample data showing trends in number of licenses consumed per day, over time.
Finding this equilibrium point is for your firm depends on both understanding your historical use patterns, and having visibility into the timing of future projects. Ultimately, subscription licensing allows you to more accurately address your company needs, based on peaks and valleys of your application’s use over time.
So you’re probably thinking “where do I even start?” Good question, we’re here to help!
In our last post we talk about TED, our basic 3-step method to getting started. If you haven’t read about it, we highly recommend that you do this first to begin the process. (To learn about TED, take a look at Tuesday’s blog post HERE.) When you’re ready for more in-depth research and evaluations, below are key tasks to taking advantage of flexible licensing.
Keys to maximize your subscription licensing:
- Categorize previous projects into sizes (by length of time and application) to determine what their license activity looked like. You can then draw generic assumptions on when in the cycle of a project you have the highest and lowest use.
- Look at your overall historical use patterns to see what your “waves” or cycles look like and which projects represented what portion of each wave.
- Plan for more frequent use reporting to identify when a “wave” is starting or waning.
- Create a “cost-per-month” chart for the vendors and applications which offer flexible licensing. This is something that you can refer back to frequently, so it is worth your time to research.
- Map new projects or project phases and their sizes to look at the impact on your licensing needs.
Does this sound like more work? Yes, it is, and it will take time to gather all of this information, but the licensing fees you can save long-term are substantial!
Here’s the good news -
Newer reporting technologies like Process Meter allow you to track license use, and associate that use to projects, to get much more fine-grained and real-time visibility into your needs. Pressure to improve margins isn’t going away, and as subscription becomes the dominant license type, firms which implement a reporting infrastructure and take advantage of subscriptions will have significant margin advantage over firms with higher fixed costs.