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Subscription vs. Perpetual License: Why Subscription Software is Actually Cheaper

Subscription vs. perpetual software, what’s the difference? How do you decide between subscription-based software versus the traditional perpetual plan model for your company? How do you know what will be better for your company in the long run?

It’s a tough decision, especially considering there are a few vital points to consider before making the decision between a subscription vs. perpetual license.

Knowing the difference between subscription vs. perpetual license is key. Lineup, a subscription management solution provider, and SellCoursesOnline state that, “over the past nine years, the subscription economy has grown by 435%, and it is set to become a $1.5 trillion market by 2025.”

Given that prediction, it is very likely that the perpetual license model could be obsolete within a few years. This article will outline why that is the case and why a subscription vs. perpetual license is different. It will also go into the details for how to embrace and implement a subscription-based software on your manufacturing floor. A staff that is fully on board will prove to be more beneficial for your bottom line.

What is the Difference Between a Subscription Software and a Perpetual Software License?

The core difference between a subscription license model and perpetual license is that a subscription software (or SaaS) is priced on an ongoing term subscription – usually yearly or monthly. A perpetual plan license, on the other hand, is paid up-front in one, big lump sum. Then, you will typically pay a yearly maintenance fee which covers upgrades and support. Those maintenance fees typically cost between 15-30% of the initial licensing cost. 

It’s important to note that a subscription software includes all of the maintenance, upgrades, and technical support in the subscription price – no need to pay hidden fees.

subscription vs perpetual license

An iceberg is the perfect depiction of the differences between the two types of software because it shows the “above water” and “below water” costs. In a subscription license, all of the benefits are provided up-front in one yearly or monthly fee – no hidden costs.

Compared to a perpetual plan, you will pay an up-front cost, but that often doesn’t include system upgrades, maintenance, customer support, or even an IT structure.

What are the Benefits to a Subscription Software Model?

Subscription software is often referred to by an acronym – SaaS which means ‘Software as a Subscription’.

In the subscription vs. perpetual debate, the major benefit of a subscription software model is the ease and simplicity for you, the customer. With SaaS software, the subscription includes all servers, storage, the management of that infrastructure, and essentially, everything that you need to actually run the software. You are able to implement software that can improve efficiency on the plant floor, without the headache of running it yourself.

All things considered, it’s cheaper to invest in a subscription software rather than a perpetual software plan because you’re sharing the infrastructure between multiple companies, effectively making a subscription software cheaper in the long run.

Some people may think there is a security concern by sharing infrastructure between multiple companies, but there is no more of a risk involved with SaaS software than a perpetual subscription.

When you sign up for subscription-based software, there are a number of things the company is doing to ensure your safety:

  • Outlining the agreed-upon conditions in a Terms of Agreement which will define the levels of access an individual will have to your data
  • Consistently making updates to the software to ensure data safety and adhering to modern security standards
  • Monitoring and fixing any bugs as they arise to guarantee your factory floor is kept-up-to-date and working efficiently

Subscription vs. Perpetual License: Why are People Hesitant to Leave a Perpetual Plan Subscription?

When debating term subscription vs. perpetual license, most people think a perpetual software subscription is less expensive, but in reality, that isn’t the case.

Since the initial cost of a perpetual license is often a considerable amount, people believe they can keep the software forever. That’s not really true. Eventually, you’re going to want to upgrade or need support which is often only provided for an additional fee.

So, let’s say you pay 25% of the initial up-front costs for that yearly support and upgrades. You are essentially paying for your software again every four years.

Another consideration is the fact that you must buy individual licenses for each individual rather than one license for everyone. It’s often a cost many forget to factor in. Not only that, but what if someone leaves and you decide not to fill the role? There is an unused license that you will not recover costs on.

Dedicating an Employee or IT Department for Support

The other big drawback? Perpetual software requires maintenance. You have to employ or have someone on contract to manage the entire software which includes obtaining the servers, fixing any errors or bugs, etc. It’s a big expense to manage in terms of both cost and time.

Let’s say you have perpetual software and it’s housed in an on-premise data center – who has to fix any issues or bugs as they arise? For example:

  • What happens if the software is running slow?
  • Or, it’s running out of disk space?
  • A new version of Google Chrome comes out, and it breaks the on-premise version, but you don’t have support?
  • Or, an upgrade is required, but all of a sudden the software isn’t working?

In all of these instances, fixing the problem would fall on you, the customer. But, if you were using subscription software, the software company would be there to help you fix any maintenance issues that arise – no extra costs added.

For most SaaS software out there, all you need is a web browser, but if you want to run it on-premise, you would need your own data center – a server, battery backup, back of the data, etc. The costs increase with on-premise software which is why subscription-based software can be very efficient.

Why are Perpetual Subscriptions Being Phased Out?

Simply, there is less to deal with by using SaaS software. More and more companies are finding SaaS easier to use. 

Let’s use an example to drive home the effectiveness of SaaS software with Mingo, a SaaS-based product.

Consider the speed of a product. If we find a bug in the Mingo Smart Factory software, we immediately fix the bug. As a result, it’s fixed for every manufacturer using Mingo – whether or not they had experienced the bug themselves.

If a bug is found in the perpetual software running on-premise, the on-site IT department has to receive the ticket. Once they have identified the problem, they will then update the code and apply the fix. This wastes precious time and resources that could be otherwise applied to other functions.

It’s clear that SaaS software is both cost and time-efficient while perpetual licenses are outdated and time-consuming.

How Does a Subscription Model Work with Mingo?

As we mentioned above, Mingo is SaaS software. There are a few good reasons for this.

  1. The costs of Mingo are transparent. What you see is what you get – no hidden costs for maintenance or support.
  2. The platform runs in the cloud and you don’t have to manage any of the infrastructures.
  3. As mentioned above, if a bug is found, we can fix the issue, and fix it for everything. There is no need to provide an upgrade that requires the help of IT to implement.
  4. The simplicity of a SaaS software provides you with peace of mind and one less thing to worry about.

Subscription vs. Perpetual License: What’s the Verdict?

The benefits of the subscription license model go beyond cost. The hidden value of support, maintenance and customer service outweigh the initial savings of a perpetual license. With the right tools and software (ahem subscription-based!), you can put your company on a path to a more efficient and productive plant floor.

Picture of Bryan Sapot
Bryan Sapot
Bryan Sapot is a lifelong entrepreneur, speaker, CEO, and founder of Mingo. With more than 24 years of experience in manufacturing technology, Bryan is known for his deep manufacturing industry insights. Throughout his career, he’s built products and started companies that leveraged technology to solve problems to make the lives of manufacturers easier. Follow Bryan on LinkedIn here.