“But it’s only $5.99 per month,” my daughter says regarding a new streaming service. In contrast, basic cable monthly contracts cost about $50-$100 per month, so it sounds like a good deal. But let’s add up the subscription pricing of all the individual streaming services we are receiving and compare. Wait a minute! My subscription cost is more than the packaged service? The subscription cost can and sometimes does exceed the packaged price, but what we give up in monthly cost savings we gain in flexibility of terms and granularity of choice.
Similarly, traditional enterprise software is heading in the same direction. Software manufacturers provide a perpetual license and then sell backend support contracts. Users own the license in perpetuity. However, as we all know, if you want to continue to add patches, call support, or upgrade to new versions, you will need a support subscription. These were paid monthly, or more commonly, on an annual basis. But what if the subscription contained both the support and license? Cloud service providers charge this way today, and soon we will start seeing traditional software providers, like VMware, offer their products via subscription licensing agreements.
In 2020 VMware began offering subscription licenses for select VMware products. Beginning May 2021, VMware will no longer offer perpetual licenses for Horizon. Current perpetual license customers may continue support for the foreseeable future however, it is best to consider changing to a subscription license now.
Subscription Licensing
There are 2 forms of subscription licensing entitlements:
1) Subscription SaaS
2) Subscription Term
The main difference is Horizon subscription SaaS-based entitlements allow you to deploy desktops on-premises or on the public cloud and deliver cloud services through the Horizon Cloud control plane console. Subscription Term licenses allow you to deploy on-premises and provide a minimum feature set that is equivalent to the corresponding perpetual license. For customers that aren’t ready for cloud connectivity, this allows an option similar in billing to full SaaS, but for a contractual term.
Benefit of Subscription Licensing, at a Cost
It seems that subscription licensing benefits VMware as it gives them a more reliable revenue stream, but what’s in it for the customer? VMware subscription licensing models allow for customer flexibility similar to the flexibility offered by public cloud providers. Customers can benefit from the low upfront costs without a long-term commitment. Instead of long, multi-month growth planning sessions for large Enterprise Licenses Agreements (ELAs) that span 1-3 years, customers can now look at current license consumption, start a subscription and add licenses at any time to support their growth. The “hurry up and deploy” mentality will no longer be needed and the “shelf ware” burden will diminish. Increasing or decreasing licenses is now possible with metered billing and customers can choose to receive bills monthly or annually.
Make no mistake, there is a cost for this flexibility: Subscriptions will cost more than perpetual licensing when totaled up over a given term. This is an exchange of an old capital expense (CAPEX) for an operating expense (OPEX) and a huge gain in flexibility and release from long-term commitments. And for that, there is a cost that needs to be considered to weigh both the accounting effects and the agility benefits to the business.
Promotion
VMware is offering a “trade-in” credit of your current perpetual licenses, up to 50 percent off the list cost of subscription-based new licenses (check out the promo.) Companies should consider making the change to subscription licensing this year to take advantage of the promotion.
More Information
This is a dramatically new way to plan and consume software, so make the right decision by contacting your Mainline Account Executive directly or contact us to start the discussion now and take advantage of promotions that leverage your perpetual licenses before they are gone forever.
In the meantime, I need to help my daughter understand how many streaming service subscriptions we already have and how we’re now paying more than our cable bill was before—that wasn’t exactly the plan, but at least we can choose to drop any of them at any given time and watch them on any device. These benefits do have a cost, too.
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