Usage-Based Software Licensing Examples and Patterns

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)…

  • Marketing application vendor
    • Old: moving from user/size of database
    • New: # of emails sent on a monthly basis
  • Development platform/ hosted RDMS
    • Old: # of developers, perpetual license
    • New: # of gigs managed on a quarterly basis
  • CAD/CAM vendor
    • Old: perpetual license based on features/capabilities
    • New: # of drawings rendered in 3D on a monthly basis
  • Telephone equipment provider
    • Old: perpetual license based on features/capabilities
    • New: peak throughput # of text messages sent per month
  • 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)
  • Video data conversion provider
    • Old: hardware
    • New: # of megs converted per month
  • Project management vendor
    • Old: perpetual software based on size of hardware (# CPU cores)
    • New: # of active projects managed per month
  • Chip design software vendor
    • Old: perpetual software based on size of hardware (#CPUs)
    • New: # of designs compiled per month
  • Application converter
    • Old: perpetual software-per seat
    • New: # of applications “managed” for conversion & perpetual license for capabilities
  • Software development tool vendor
    • Old: perpetual concurrent # of users
    • New: # of users exceeding perpetual license per month

There seems to be some patterns:

  1. Combination of “usage” (pay-for-use) and “capabilities” (pay perpetual or time-based for access to these services)
  2. A significant reduction in what is being monetized (2-3 meters, no more than that)
  3. Meters are aligned much closer to the value derived from the use (# of megs converted vs. #CPU)
  4. 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.