Perpetual Versus Saas Sales Licensing Models

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|Software as a Service | | | |Perpetual versus SaaS sales licensing models | | | | | 2012 | | | | | | |

Executive Summary
Efficient use of information technology (IT) can be a source of competitive advantage therefore software as a service (SaaS) has become an alternative to perpetual sales models as a means of reducing expenditure on IT. SaaS is a cloud enabled technology which evolved from applications service provider (ASP) and provisions software application services on a pay per use or subscription basis. No upfront investments on IT infrastructure or software is required as the service provider hosts, maintains, secures and upgrades the software as part of the service it charges users for. Future trends reflect that more IT users will be switching from the perpetual to SaaS model. Access to software applications is authorised by using software licenses which protect the rights of the software vendor (developer) against loss of revenue through piracy and protect the user from inadvertently violating the vendor’s rights and being fined. There are various types of software licenses that cater for perpetual and SaaS sales models and the use mechanisms to enforce the terms and conditions contained in the license. The benefits and pitfalls of using Saas reflect that the benefits outweigh pitfalls. This does not indicate that all IT users will benefit from adopting SaaS as perpetual models have features that will be more beneficial for their IT business solutions.

Contents
1Introduction5

2Software as a service6

2.1Overview6

2.2Background7

2.3Trend7

2.4Characteristics of SaaS8

2.5SaaS product life cycle9

2.6SaaS software development9

3Software licensing11

3.1Why software licensing?11

3.2Perpetual and SaaS licensing models12

3.3Perpetual Licensing models12

3.3.1Node-locked mechanisms12

3.3.2Network license14

3.3.3Processor licenses15

3.4SaaS based licensing models15

3.5SaaS sales licensing models16

3.5.1Subscription17

3.5.2Pay per use licenses17

3.5.3Based on the Subscription to the Functionalities17

3.5.4Free Software, Pay for Support licenses18

3.5.5Processor license - SaaS18

4Advantages and disadvantages of SaaS vs perpetual sales licensing models18

4.1Advantages18

4.2Disadvantages21

5Recommendations and conclusion23

5.1Recommendations23

5.2Conclusion24

References25

Introduction

Increased competitiveness in markets is putting pressure on organisations to improve the productivity of their information technology by either reducing IT expenditure or getting more utility out of it (Robinson 2006:34). To this end organisations have been exploring and taking advantage of the alternatives available to procure their information technology (IT) software. Software procurement consists of transactions where the software author grants a software user permission to use the software under predetermined terms and conditions. The terms and conditions are presented in the form of a software license. (Gangadharan &...
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