Switch to SaaS Licensing Model: How It Can Impact Businesses

As the software industry keeps evolving with new technologies, recent licensing trends reflect a paradigm shift of preference among vendors (and customers) from licenses hosted on the customer’s system to SaaS-hosted applications. This subtle change is not only affecting the current infrastructure but also impacting corporate functions and licensing terms and conditions. 

Is your organization also going through this transition? Here are certain factors you must prioritize.

Consequences of the transition towards SaaS: Decode the specific distinctions

In traditional licensing models, customers purchase a license once and gain access for a limited time (subscription model) or lifetime (perpetual model). However, with the rise of SaaS, the perpetual concept of owning a license forever is becoming a thing of the past. The SaaS licensing models are either term-based or subscription-based. Some vendors also follow a combination of the two. In SaaS models, the software vendor hosts the license on cloud, which customers can access via internet.

The consequences of these changes are not limited to license hosting and usage. They also impact finances and operations as the shift is from a product-based to a service-based model. So, organizations need to create provisions and adjustments to make this transition smooth and hassle-free. 

Impact on finances

The decision to switch from perpetual to SaaS hosting also has a significant impact on the finances of the customer. Subscribing to SaaS solutions means you are paying not only for the software but also for the hosting and support. Here are a few examples that reflect how this transition is affecting cash flow.

A few years back, AutoDesk permanently canceled their perpetual licenses, forcing customers to subscribe to their SaaS solution. Notably, now you cannot subscribe to a single AutoDesk app; you have to choose from one of their collections that feature multiple apps. As a result, you may pay for a few apps you may not use at all. However, these charges are usually considered operational expenses rather than capital ones, as it include hosting and support.

On the other hand, Adobe was recently sued by FTC for allegedly ‘trapping customers’ into year-long SaaS subscriptions with their non-transparent cancellation clause. This led to the dispute as customers faced difficulty canceling subscriptions, leading to frustrations as well as wasted licensing expenses.

These instances reflect that transitioning to a SaaS licensing model can appear beneficial for managing finances, but organizations must consider the long-term expenses before making any business decision.

How it affects operations and other technical issues

• Data transfer: Migrating data and processes from a hard drive to the cloud is no simple task. Enterprises should make a 360° data migration plan to minimize downtime and loss of data.

• Integration with existing system: If you currently have a customer-hosted licensing environment, integrating SaaS solution into your architecture can be a major challenge. You may need to invest in integration services or middleware if the existing solution doesn’t support direct integration.
• Vendor lock-in: Depending on one particular vendor for a specific type of software solution often leads to ‘vendor lock-in’, making it complicated and expensive to opt for a different vendor. That’s why enterprises should take this factor into consideration before purchasing any such solution. Before signing any agreement, make sure there are clauses that mention transparency with regards to data access as well as termination procedures.

How OpenLM helps you make the best out of your SaaS licenses

Having started our journey as a solution that helps manage customer-hosted licenses, we at OpenLM are now enabling you to efficiently track the usage of your cloud-hosted SaaS licenses and optimize each with data-driven reports. OpenLM facilitates you with license harvesting, a feature that allows you to reclaim concurrent licenses that are open but inactive (idle)—thus making it available for other users. You can also monitor idle time for named-user SaaS licenses, and optimize them with processes such as periodic access clean-ups, data-based reallocations, and more.

SaaS stands for scalability, and we at OpenLM are two steps ahead in helping you in this evolution. Want to get started? Fill up this small form to set a meeting with our SLM experts.

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