An answer to the software licensing maze?

commentary Market research firm IDC believes the end is near for traditional licensing models.In a recent report, it predicted that over 50 percent of enterprise software vendors were likely to modify their software licensing schemes, and place a greater emphasis on subscription-based services in the next year.

commentary Market research firm IDC believes the end is near for traditional licensing models.

In a recent report, it predicted that over 50 percent of enterprise software vendors were likely to modify their software licensing schemes, and place a greater emphasis on subscription-based services in the next year.

The study involved participants from both sides of the fence -- 100 vendors and 100 end-users.

Most vendors surveyed said that traditional licensing models were no longer suited in today's environment due to a fundamental shift in "customer dynamics". Two main factors driving this change are the management of software contracts and false expectations given to customers.

The study revealed that medium- and large-sized customers had an average of 40 software contracts under their belt, and 70 percent of these customers expect the complexity of managing these contracts to increase.

On managing expectations, IDC said there's a disconnect between current licensing models and business value. The research company believes that in order to reach a concensus on value, software vendors and customers "must shift away from adversarial negotiating tactics and work together to determine the most appropriate licensing approach".

All these findings, however, aren't new. More than two years ago, software maker Oracle predicted such moves but only recently acted on it. In January 2004, Oracle introduced user-based pricing for its outsourcing services ranging from a monthly fee of AU$17 to AU$207.

"As the IT industry evolves, you will continue to see new licensing models," said Jacqueline Woods, Oracle's vice president for licensing.

-Employee-based pricing is the next evolution of outsourced licensing options and reflects where Oracle feels the software industry is headed," Woods said.

And in the customer relationship management space, Siebel Systems followed the lead of Salesforce.com by recently introducing a subsciption model.

The same IDC study states that 43 percent of vendors believe that by 2010, a majority of sales will be derived from subscription services. However, only 26 percent of customers surveyed held this view. So, is this a case of vendors fulfilling a demand or creating one to demonstrate perceived value?

Managing software licences can be a nightmare but I'm not sure if a subscription-based service will ease the pain.

Do you prefer the traditional, perpetual licensing scheme or a subscription-based approach? What type of new licensing models would you like to see? E-mail your thoughts to edit@zdnet.com.au.