Perpetual licence or subscription: which works out cheaper

A perpetual licence and a subscription cost the same after 24 months. For up to two years the subscription works out cheaper, after that the one-off licence, and the gap keeps growing: after five years buying outright is about 38 per cent cheaper, after ten about 51 per cent. The calculation includes the support fee that is added to the one-off licence from the third year. Even so, a subscription can be the better choice when the company has no capital budget, needs cloud hosting or is deciding over a horizon shorter than two years.

Where the 24-month break-even point comes from

A one-off licence costs 24 times the monthly rate and includes updates and support for two years. After that period support is paid for, and the right to use the system stays for good. A subscription is twelve instalments a year, each one twenty-fourth of the licence value, so in a year you pay half of what buying outright costs.

The figures in the table are percentages of the licence value. On the licence side that is 100% plus paid support from the third year; on the subscription side, half the licence value for every year.

The period of included support was chosen so that the statement ‘the licence costs the same as two years of subscription’ holds true in terms of total cost of ownership. Without those two years, the costs would break even later than at 24 months. The pricing configurator shows both options for the same configuration side by side, so you can check the break-even point against your own figures.

When a subscription is the better choice

A subscription wins when the company has no capital budget. The difference between a one-off outlay and a monthly instalment then comes down to which budget the money comes from and who has to sign off the spend.

A subscription is also the only way to get hosting. A server in our cloud comes only with a subscription, because hosting is an ongoing cost that a one-off payment cannot cover.

It also pays off over a horizon shorter than two years: for a temporary deployment, on a site under construction, or when testing the solution before deciding on its final scope.

What stops working when the payments end

When a subscription ends, the system stops working. A subscription is a fee for the right to use the system, so when the payments end, so does the right.

With a one-off licence, as with any outright purchase, the system keeps working with no fees at all. After two years the only thing you decide is whether to extend support. Without an extension you get no updates or help, and the system goes on working as it did before.

Does the payment method change the implementation price?

No. The payment method has no effect on the implementation fee, because the fee is a percentage of the licence value and is identical in every option: it is the same work, namely the analysis, configuration around your process, training and acceptance. Calculated from an annual amount, it would give different prices for the same job.

Questions and answers

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