For most of the history of enterprise software, the model for how organisations have purchased applications has largely been the same. The perpetual license has dominated, whereby companies pay the full price of the software up front and are allowed access in perpetuity.

Perpetual licenses are not always ideal. For instance, they require higher upfront costs – before any value has been enjoyed. You can always buy more – but if you over-purchase, you cannot get a refund for unused licenses. In addition, enterprises are essentially buying on faith that they will derive sufficient ROI from the software to warrant the high initial outlay. In addition, similar to any other strategic business investment – it doesn’t always make business sense to purchase software outright. In certain cases organisations would prefer to pay for an asset at the same time the value is being received.

While historically the perpetual software license was largely the only option enterprises had – this has rapidly changed.

SOURCE: information-age.com