The “Seat Licensing” Software Model

Do you lease or buy your car(s)? Buying is a great solution for many people. But, when a newer model comes along that offers new features, sometimes those features can be added to an older car, but many times they cannot. For instance, it’s pretty easy to add satellite radio or a GPS to an older car. But, it is often impossible to add features like adaptive cruise control, collision-preventing automatic braking, self parallel parking or autonomous driving to an older car. If you own an older car and you want these new features, you have to buy a new car.

This is one reason why leasing cars is so popular. When you lease, you pay a monthly lease payment, and then return the car at the end of the lease. If you then lease another car, you’ve effectively  “upgraded” your old car to a new one with newer features. You do have to keep making the monthly lease payments, but if you borrow the money to buy a car you’re going to be making monthly payments anyway. Buying does offer a residual value after the car had been paid off, but the car is older. And, since lease payments are typically lower than comparable loan payments, lessees typically spend less each month, and have a “built in” upgrade opportunity at the end of the lease. This lease vs. buy tradeoff is actually remarkably similar when it comes to business software.

When business software first started to become the indispensable tool it has now become, licenses were sold, not leased. This was called the “box” model because you bought a box that contained the software license and the software itself. This was true of WordPerfect, Excel, QuickBooks, and virtually every available type of software. Under this model, you paid up front when you bought the software and you didn’t have to pay again. But, when the software was improved, when a new version was released, if you wanted those new features you bought another “box” with the newer software, and replaced the older, less useful software.

These days, software is more often leased than sold. This is called “Seat Licensing”. Just like leasing a car, the lessee pays a low ongoing monthly fee to use the software for as long as they use the software. The per-seat lease payments do continue for as long as you use the software, but there is no large up front payment to buy the software. Perhaps most important when it comes to ongoing productivity, Seat Lessees are automatically entitled to the next software release when it becomes available. Gone are the worries about not being current with modern standards of efficiency or even compliance. The Seat License model ensures lessees always have access to the latest software, and without periodically having to buy new software with its high initial price.

As a user of business software, the Seat License model is even more compelling than leasing a car. As mentioned, if you buy a car you can sell it when you’re done using it. BUT, selling your old software is usually more problematic. In many cases users of software are not entitled to resell it. But even if you can resell old software, the price isn’t determined by how much you used it (like mileage on your car). The possible resale price is based on strict market value, as well as whether your box of software is complete. Typically, there is no value in reselling software. The real value from software comes from the productivity it offers. That’s why leasing is so popular: The cost is reasonable and easily budgeted, and the software is always up to date.

Seat licensing is a solid business decision that supports both productivity and growth. Now common amongst most software authors and vendors, Seat Licensing is a solid, business friendly, cost effective way of remaining current and competitive.

By | 2018-09-11T16:10:31+00:00 February 19th, 2017|Blog|0 Comments

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