Hey! I Already Paid for the Software. Why should I pay again?

If you think about it, business specialty software is remarkable. It has gone from non-existent to being an integral part of every aspect of our business lives, all within the span of many of our own lifetimes. Remarkable indeed.

When most of us first got exposed to business specialty software we bought our first PC and at the same time we bought software. It came in a box with enclosed floppy disks. We bought it at the same store where we bought the PC. The software was often WordStar or pfsWrite or WordPerfect or Excel or QuickBooks. We installed it on our PC. Perhaps we installed it again on another PC. We may have even then given the disks to a friend so they could install the software on their own new PC. This is known as the “box license” model. One of its primary characteristics was a large initial up-front license fee.

The next stage was the development of business specialty software. Ultimately software vendors wrote specialty software to address the business needs of every different business. From lawyers, to doctors, to auto parts stores, doctors, dentists, grocery stores, manufacturers, shipping logistics and many more, specialty software evolved to add efficiency to virtually every business. This is certainly true of debt collection, and even more specifically legal debt collection. Historically, this specialty software was also licensed under the “box” model.

As a debt collection specialist you selected a specialty software product to use in your business or law practice. When you did, the software vendor typically charged you a pretty substantial sum to license that software. It probably felt like a lot of money (because it was!), but it was justifiable because the software added awesome efficiency, more than paying for itself, usually in a fairly short time. Even better, that expensive “box” license was almost always a perpetual license. That is, once you bought the license it lasted forever. You couldn’t give that license to anyone else as in the floppy disk days, but you were licensed to use the software forever. Now, however, many of those same software vendors have changed to a “seat license” model in which you’re being asked to pay an ongoing monthly license fee to use the software. What changed? What happened to that expensive perpetual “box” license?

To begin with, if you do have a perpetual license you are certainly entitled to use the software you licensed, in perpetuity. But, what has changed is the underlying hardware and system software. As computers and system software have evolved, they have added capabilities ranging from faster processing to larger storage to increased capabilities. Computers have evolved from capabilities known as 8-bit, to 16-bit, to 32-bit to 64-bit (and beyond). While software that was written on a 32-bit computer may run on a 64-bit machine, it just doesn’t have the ability to take advantage of the expanded capabilities inherent in more modern hardware and system software. And, hardware and system software will continue to evolve. That is an absolute certainty.

Responsible and robust specialty software vendors (like Vertican!) have responded to new, modern systems by rewriting their software to take advantage of enhanced system capabilities. Entire rewrites were required because the older software lacked the internal infrastructure to
leverage capabilities that just didn’t exist when the software was first written. The challenge for the software vendors then became how to pay for their newly rewritten software. That brings us to the “seat license” model now common in specialty business software.

Under the old “box” model you would have to buy a license to the new software, just as you did with the original license. This is what you did with Excel or WordPerfect. You bought a new “box” license to the new software and you replaced the old software with the newer software. Or, you switched to a new product like Word instead of WordPerfect. Either way, this required another big, up-front payment. Even if the software license is $595, if you properly license it for all your computers and you have 30 computers, that up-front cost to buy the new “box” licenses is $17,850 (plus tax)! Not only did the original licensing model require another large payment, but the problem of system evolution still existed. When the next generation of hardware and system software became available, the specialty business software was immediately on the road to obsolescence, and you were on the road to that next big up-front “box” license fee.

The modern solution is the “seat license” model. Under this model, you pay an ongoing monthly seat license for the software, for as long as you use that software. Despite the outward appearance that “paying forever” may seem onerous and even unfair, the exact opposite is true. There are many advantages to the seat license model for the users of the software.

To begin with, under the seat license model the problem of constantly looming obsolescence is solved. The vendor commits not only to enhancing their current software but also to furnishing their clients with all newly rewritten software, keeping the users current with evolving hardware and system software. In addition, there are no large up-front license fees. In fact, the actual cost of the seat licenses are usually calculated to amortize the total cost over time, typically 5 years. So, if you take into account the big up-front cost of the perpetual license (plus interest if you borrow the up-front money), plus the cost of enhancements over 5 years, the seat license cost will be competitive, especially considering the value of getting newly rewritten software without the big and repeating up-front license fee. And, because the monthly license fees are steady, it is much easier to budget under the seat license fee than it is under the large up-front fee model. Finally, the seat license model is entirely scalable, in both directions. If your business grows and you need to add seats, your costs will increase only by the small added monthly license fee. But, if you need to downsize for any reason, since you pay only for the software you use for as long as you use it, your costs will go down in this event.

Most modern business software is now seat licensed. This includes Microsoft Office 365 (Outlook, Word, Excel, etc.) as well as Atlassian (project management software we use at Vertican), Oracle, Microsoft SQL and many others.

Ultimately, the greatest value to the users of seat licensing comes down to the vendor. If the software vendor is responsible and robust and remains committed to constantly responding to changing business landscapes and new challenges, the seat license model offers many advantages over the old box license model, on everything from reliability and efficiency to dependability and compliance. For all these reasons you should embrace seat licensing. It’s good for your business.

By | 2017-03-29T12:18:24+00:00 September 1st, 2016|Blog|0 Comments

About the Author:

Leave A Comment