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Purchasing FileHold: Perpetual vs subscription licenses

Thursday, October 1, 2020

For the last 14 years, FileHold software has been sold as a perpetual license with an optional ongoing support agreement. This allowed customers to buy FileHold and have a relatively low total cost of ownership (TCO) over the years. They also have the choice on whether to purchase support and upgrades or not. We have customers who purchased our licensing and have used the software for up to 10 years without a support agreement (testimony to how bullet proof the software is). Their TCO has been very low.

Government agencies and some other organizations operate with an annual capital budget or they may receive a one-time grant to purchase something. When I did work in government, it was almost always possible to get capital funds for projects but it was always hard to get increases in operating budgets (employee pay increases, inflation, and so on). For those organizations, the ability to purchase a perpetual license with capital funds and have a low ongoing support cost makes the most sense. FileHold has one government agency customer who got a COVID-19 grant to eliminate paper forms coming into their organization. FileHold is currently in the process of building a forms portal that integrates with the document workflow feature to solve that problem. Our ability to provide the portal with a perpetual license made it possible to use the capital funds grant.

More recently, we have created a subscription offering in which the initial cost for the product is lower but customers are forced to stay on the subscription if they want to continue using the software. At the present time, this seems to be the most common strategies of software vendors as they move to the cloud. We all want to become utilities with recurring revenue.

FileHold will offer both options: on-premise and the cloud licensing. We hope that by providing both options, we can provide all of our customers a model that fits their organizational needs.

My personal experience in this strategy is from the 1980s when I was working for a large copier company. At that time the only way you could get a copier was to rent it (subscription). This was a very profitable and successful business strategy. But soon enough, along came the big Japanese copier companies that gave customers the option to purchase the copier. They pointed out that the total cost of ownership would much less if you simply bought the copier and paid for support separately. Their strategy essentially destroyed the subscription copier business. Not every customer wants to subscribe to things for life. I wonder if at some point software vendors will revert back to licensing models because the market will demand it.

To talk more about the licensing models at FileHold, email [email protected].

 

Larry Oliver, President of FileHold Systems Larry Oliver is the founder and President of FileHold software. He can be contacted at [email protected].