For the last year, I’ve been talking to a large number of software vendors and device manufacturers about pricing their products using usage-based software licensing models.
There seems to be an explosion of new software licensing solutions being considered. I personally believe that this new approach will be the default pricing model within the next 5 years and therefore wanted to share some potential applications (to stir up the creative juices). I have kept these examples anonymous, as most of these licensing models have not been released in the market place yet (but soon)…
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Marketing application vendor
- Old: moving from user/size of database
- New: # of emails sent on a monthly basis
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Development platform/ hosted RDMS
- Old: # of developers, perpetual license
- New: # of gigs managed on a quarterly basis
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CAD/CAM vendor
- Old: perpetual license based on features/capabilities
- New: # of drawings rendered in 3D on a monthly basis
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Telephone equipment provider
- Old: perpetual license based on features/capabilities
- New: peak throughput # of text messages sent per month
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Translation services
- Old: each job was priced based on complexity, language, speed of job
- New: # of characters translated by the month (regardless of all other factors)
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Video data conversion provider
- Old: hardware
- New: # of megs converted per month
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Project management vendor
- Old: perpetual software based on size of hardware (# CPU cores)
- New: # of active projects managed per month
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Chip design software vendor
- Old: perpetual software based on size of hardware (#CPUs)
- New: # of designs compiled per month
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Application converter
- Old: perpetual software-per seat
- New: # of applications “managed” for conversion & perpetual license for capabilities
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Software development tool vendor
- Old: perpetual concurrent # of users
- New: # of users exceeding perpetual license per month
There seems to be some patterns:
- Combination of “usage” (pay-for-use) and “capabilities” (pay perpetual or time-based for access to these services)
- A significant reduction in what is being monetized (2-3 meters, no more than that)
- Meters are aligned much closer to the value derived from the use (# of megs converted vs. #CPU)
- All producers are providing a predictable/consistent pricing meter and a variable component so that CIOs/finance can budget
I think the combinations of:
- Simple
- Easily tied to value
- Mostly predictable
Is right on the money….
Learn more about compliance management solutions that enable usage-based licensing and pricing.
