Wanted to share this article from Fortune Magazine / CNN Money website called 'Big Software has duped us for decades'. Roger Burkhardt does a pretty good job of describing how enterprise software licensing actually works... I've included some excerpts and added a few reader comments as well.
The article starts off by telling us something few know, but that everyone should:
"Here's how the software business really works...
"Big Software Goliaths (think PTC, Siemens, et al) use multi-year enterprise license agreements that lock you into annual fees that go up, but can almost never be reduced. They encourage you to make large upfront purchases of software licenses by providing significant volume discounts. Volume discounts are common in the software industry and help you achieve a lower price-point on your software licenses and annual support fees. However, encouraging you to purchase larger quantities than you need often leads to "shelfware", i.e., owning a whole lot of software you don't use.
"What if you want to downsize? Because annual support fees are tied to the net license price, the discount is tied to the original volume of license purchased. Therefore, the Big Software companies argue that you lose the discount originally granted on the contract. (of course, shame on us for thinking otherwise) Their typical tactic is to re-price right back to list price, not a reduced discount, and with typical discounts in the 25 to 85 percent range it is financially infeasible to downsize...
"If you don't need to downsize your usage but want to just hold steady and pay maintenance you'll be caught in the renewal trap. When your multi-year contract comes up for renewal, you'll find that your contract has no cap on subsequent increases to the annual support contract. The high-paid sales person (we all know this guy; gold chains, lots of mousse) will then warn that your original discount will evaporate if you don't buy more licenses. It will be cheaper to buy more "shelfware" than to pay list price for your maintenance.
"In addition, if you ever want to reinstate support on the unused portion of your licenses, you would be required to pay all the back-support fees for the period you cancelled...
"Big Software players have demonstrated their power by raising prices during the worst economic period since the Great Depression (think PLM vendors' switch to named user licensing, increasing maintenance fees, etc)
"Meanwhile, contract consolidation and the co- termination of contracts further reduce options, as more software is covered under a single contract.(you know combining CAD, PDM, visualization, etc in one agreement - seemed like a good idea at the time) You may ask for a consolidation, but more likely than not, the vendor will argue that the entirety of the new contract is open for re-pricing, if you attempt to modify one component of that contract..."
At Aras our answer to these practices is simple: eliminate PLM licenses... forever.
You should definitely check out the complete article and make sure to read the comment posts as well, there's a ton of really rich real-world insight.
What's your take? Is everyone stuck on the same treadmill locked-in by Big PLM Software forever? Or has the time finally come for a more pragmatic, honest, and open approach?