Comparing Apples and Oranges (On-Premise vs Cloud Licensing)
September 4, 2014
One of the most common conversations we have with clients are clients wanting to compare cloud licenses to perpetual licenses. On-Premise licensing traditionally is perpetual based, meaning you own the rights to use the license perpetually even if you do not maintain support. Cloud Licensing is subscription based, meaning if you stop paying the subscription you no longer own the right to use the license and must uninstall. The price models are very distinct.
Comparing Traditional On-Premise Licensing to Cloud Based Licensing models is really like comparing apples to oranges. Subscription is less money upfront but continues every year and generally is categorized by accounting as operational in nature. Perpetual licensing can be more costly upfront for the first few years and then less as you pay to maintain the software. The new license is generally categorized by accounting as capital with a split for the maintenance as operational. So how do you ensure you are getting the best value overall for your business? What if you don’t want an apple or an orange but something in between? First it is important to understand your unique wish list.
Are you looking to move to the cloud? Or are you looking to license the cloud?
There is a big difference here, as vendors lean towards their subscription based cloud models there will most certainly be a push towards cloud adoption. However, licensing the cloud way does not force you to migrate to the cloud. Cloud migration is always on your terms. So you can renew your licensing agreement in a cloud model without committing to when or how you will migrate to the cloud or if you ever will. Why would you do that you ask?
Often cloud models can bring significant price advantages because vendors are incenting clients to move towards the cloud, and the cloud can remove other license costs for businesses. They allow for users to access multiple devices under a single license that allows for laptops, desktops, tablets and options to work from home or personal devices.
So there could be a benefit to moving to the cloud, but what about your capital investment, all those years you spent buying licenses? You want an apple that looks like an orange. Anyone that has spent time with software contracts will tell you that over the years we have been led to believe that changes to a vendor’s terms and conditions are rare as a unicorn, however in the new market of cloud licensing, that apple orange hybrid is less rare than you might think. Getting it just requires the knowledge of where you can and cannot request adaptations to your contracts. Partnering with a knowledgeable licensing specialist is essential and can mean all the difference between success and failure in the new licensing world. So start by contacting a licensing specialist that can help walk you through both the financial analysis and the potential adaptability of vendor cloud contracts, creating you that perfect apple that just happens to look like an orange.