43% of software vendors and only 26% of customers prefer software subscriptions

In the study, 75% of participating software vendors’ aggregated software revenues were associated with perpetual, versus subscription, licensing methods. Perpetual licensing sales are generally recognized as revenue up front, while subscription revenues are recognized over time. However, customers and vendors involved with the IDC study are considering a move towards subscription licensing. In fact, 43% of software vendors and 26% of customers believe the majority of worldwide software revenues will be derived from subscription-based software offerings by the year 2010.

Customer complexity is also driving change. IDC’s study revealed that medium and large-sized software customers are managing an average of more than 40 software contracts, and 70% of these customers expect the complexity of managing these contracts to increase. This complexity leads to increased costs for customers and makes it more difficult for them to track software license compliance. Both customers and vendors will benefit if the business complexity of managing so many software contracts is alleviated for customers. Another key dynamic fueling change is the disconnect between current licensing models and business value. Although this disconnect varies according to software market, 72% of software vendors and 70% of software customers strongly believe that the software industry must place a greater focus on clearly establishing the business value of software.