IDC Forecasts Strong Growth for Software Subscription Revenues While Revenue from Perpetual Licenses Declines
FRAMINGHAM, MA – MAY 25, 2004 – Worldwide revenues associated with subscription software licenses are on an upward swing. According to a new IDC study, software subscription licensing will grow at a 16.6% compound annual growth rate (CAGR) from 2003-2008, while perpetual licenses will experience a –0.3% CAGR. By the end of the forecast period, subscription license revenues for the worldwide software market will reach $43 billion.
"The increased interest in subscription licensing stems from industry consensus that traditional licensing models are no longer suitable," said Amy Konary, program manager for IDC's new Pricing, Licensing and Delivery service. "Subscription models help vendors increase the predictability of their software revenues, making it easier to demonstrate future health. Customers enjoy the low up-front cost of the subscription model and the ability to build an ongoing relationship with the software provider that they pay on an ongoing basis."
However, subscription licensing models can have drawbacks. Moving to subscription revenues can have a negative impact on vendor revenues and ultimately share price. It also requires vendors to sell customers on the value of their software on an ongoing basis. Customers like this aspect because they believe it results in better customer support. Konary added, "Perpetual licensing will make the most sense in some cases and in others subscription licensing will. It really depends on the vendor's and customer's situation and preference."
IDC's Worldwide Subscription Software Licensing Forecast, 2004-2008 (IDC #31314) study provides a detailed assessment of the strengths and weaknesses of subscription and perpetual software licensing models and worldwide revenue forecast for each method through 2008. Included are profiles of selected subscription licensing strategies employed by Macrovision, NetSuite, Salesforce.com, SAS Institute, and Synopsis, as well as recommendations for software vendors considering the move towards subscription.
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