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How can you evaluate the ROI of different software licensing models?

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Software licensing models are a crucial factor in the engineering design process, as they affect the cost, flexibility, and scalability of your software tools. Choosing the right model can help you optimize your return on investment (ROI) and achieve your design goals. But how can you evaluate the ROI of different software licensing models? In this article, we will discuss some common types of software licensing models, how to compare their benefits and drawbacks, and how to measure their impact on your design performance and budget.

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1 Perpetual licensing

Perpetual licensing is a traditional model where you pay a one-time fee to own the software and use it indefinitely. This model can be attractive if you need a stable and reliable software that does not require frequent updates or support. However, perpetual licensing also has some disadvantages, such as high upfront costs, limited scalability, and potential obsolescence. You may also have to pay extra for maintenance, upgrades, or additional features. To evaluate the ROI of perpetual licensing, you need to consider the total cost of ownership (TCO), which includes the initial purchase price and the ongoing expenses, and compare it with the expected value of the software over its lifetime.

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2 Subscription licensing

Subscription licensing is a popular model where you pay a recurring fee to access the software for a specific period of time. This model can be beneficial if you need a flexible and scalable software that offers regular updates, support, and cloud services. You can also adjust your subscription plan according to your changing needs and budget. However, subscription licensing also has some drawbacks, such as recurring costs, dependency on the vendor, and possible loss of access or data. To evaluate the ROI of subscription licensing, you need to consider the total value of subscription (TVS), which includes the benefits of the software and the services, and compare it with the recurring costs and the opportunity costs of alternative options.

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Don Kobs

Research Design Engineering Program Manager
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Subscription based licensing is excellent for enterprise applications where users only need to use the tool intermittently. Vaulting applications, FEA, CFD, etc where designers can log in, use the tool, then log out and free up the license for others to use is a great way to save money on these kinds of applications. This requires a culture within the engineering team (and others) who may use the software to keep licenses checked in when not in use, but after a while of using it, this becomes second nature.

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3 Usage-based licensing

Usage-based licensing is a newer model where you pay based on how much you use the software or its features. This model can be advantageous if you need a variable and customized software that charges you only for what you need. You can also optimize your usage and avoid paying for unused or unnecessary features. However, usage-based licensing also has some challenges, such as unpredictable costs, complex billing, and potential overuse or underuse. To evaluate the ROI of usage-based licensing, you need to consider the total value of usage (TVU), which includes the value of the software and its features based on your usage patterns, and compare it with the usage costs and the trade-offs of other models.

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4 Hybrid licensing

Hybrid licensing is a combination of different models that allows you to tailor your software licensing to your specific needs and preferences. For example, you can use a perpetual license for your core software and a subscription or usage-based license for additional features or services. This model can be ideal if you need a balanced and customized software that offers the best of both worlds. You can also leverage your existing investments and explore new opportunities. However, hybrid licensing also has some complexities, such as compatibility issues, management difficulties, and contract negotiations. To evaluate the ROI of hybrid licensing, you need to consider the total value of hybrid (TVH), which includes the value of the software and its components based on your needs and preferences, and compare it with the hybrid costs and the risks of integration and coordination.

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5 ROI calculation

To calculate the ROI of different software licensing models, you need to use a formula that compares the net benefits and the net costs of each model. The net benefits are the difference between the value and the cost of the software, while the net costs are the difference between the cost of the software and the cost of the next best alternative. The formula is:

ROI = (Net Benefits - Net Costs) / Net Costs

The higher the ROI, the more profitable the software licensing model is. However, you also need to consider other factors, such as your design objectives, your project duration, your user requirements, and your market conditions, when choosing the best software licensing model for your engineering design process.

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Andre P.
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Acredito que o ROI neste caso involve produtividade e o custo da ferramenta de análise. Caso n?o tenha um valor adequado, n?o está alinhado ao crescimento n?o favorecendo o retorno do investimento.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you evaluate the ROI of different software licensing models?

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6

1 Perpetual licensing

2 Subscription licensing

3 Usage-based licensing

4 Hybrid licensing

5 ROI calculation

6 Here’s what else to consider

Engineering Design

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How can you evaluate the ROI of different software licensing models?

1

2

3

4

5

6

1 Perpetual licensing

2 Subscription licensing

3 Usage-based licensing

4 Hybrid licensing

5 ROI calculation

6 Here’s what else to consider

Engineering Design

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