Licensing methods: initial price versus lifetime cost

Return to Identifying costs  |  Go to Budget & ROI

Before contacting vendors, consider the operational and financial aspects of software licensing models carefully. Some vendors offer more than one licensing approach. Decide what will work best for you and make your list accordingly.

Traditional perpetual license, with annual maintenance

If you have the budget, this path is usually the simplest to manage as well as cheapest over the long run because you have a definite control over your costs. The alternative license methods all represent an on-going cost, and may bundle financing costs into their monthly charges.

Perpetual licenses, as well as subscription licenses, let you tailor the configuration to your exact needs and even customize the product and/or its interfaces. You have complete control over performance, storage costs, maintenance and service interruptions, and - most important - your critical product data. Furthermore, if you're perfectly satisfied with the system that you have, the maintenance can usually be stopped.

Subscription or lease

This is typically like a magazine subscription where you can buy for any number of users, and can stop at the end of the subscription period. It's an inexpensive way to get into PLM, since there are no large upfront software costs, except (if needed) a database server license. You still get the operational benefits of a perpetual license: high performance, typically a superior user interface, in-house control of your critical product data, ability to tightly integrate your other systems. Subscription licenses are sometimes preferred because they can be dropped if, for instance, you only required a large number of licenses for a temporary project, or you're concerned about unaccounted-for licenses installed on obsolete PCs. Some subscription models allow you to convert to perpetual licenses after a certain period ("lease to own").

Internet ASP-based services

A PLM application service provider (ASP) hosts the entire PLM system off-site, using a data center shared among all of its customers. A PLM ASP perhaps offers the most financially attractive short-term PLM solution but comes with significant longer-term risks. The per-user cost is initially reasonable if you aren't particularly concerned with the total cost over 5 or 10 years.

The principal benefit of a PLM ASP is that the vendor handles the hardware and software management tasks: acquisition, installation, maintenance, and upgrades. Furthermore, the ASP defines a rather specific set of features that simplifies your configuration choices. Finally, if you don't want to bring your legacy data into the system, and can quickly make your configuration choices, you can have access to your PLM system in a matter of hours.

As you'll see, we have reservations about a PLM ASP solution; a hosted application may be perfect for incidental business processes (think "travel reservations" or "HR benefits"), but it's a much tougher decision when applied to mission-critical functions and irreplaceable proprietary data.

When considering an ASP solution, "companies will have to decide whether they're comfortable with sending and storing sensitive documents outside their corporate infrastructure." Jim Rapoza, eWeek

If limited budget or internal IT resources suggest a PLM ASP, you'll want to weigh these issues:

• Your company's mission-critical data is not on site. This has two effects:

  • How much do you know about the security, backup process, operations skill, disaster recovery procedures, and financial stability of your PLM ASP, and

  • What happens to your productivity if your Internet connection or PLM ASP goes down for a day?

• A PLM ASP solution typically implements a "one size fits most" approach, and is much more limited in its configurability; make sure your business processes won't be constrained.

• Usability will be limited by the browser-based user interface, and web technology simply isn't as flexible and as powerful as native applications. Can you imagine CAD or even a spreadsheet hosted on the web?

• Performance is determined by your Internet connection's available bit rate and utilization, your vendor's available bit rate and utilization, the load on datacenter computers, and the systems selected for the datacenter. If you aren't happy with the system performance, upgrading will require more analysis and negotiating. There's no guarantee that you'll get the performance you need if your requirements exceed your vendor's abilities.

• There may be additional charges for exceeding contract limits for data storage, processing time, or connection bandwidth.

• Upgrades and service downtimes are scheduled for the vendor's convenience, not yours. Except during project "crunch time", this should not be a significant issue if your office runs inside the typical workweek, especially if you select a PLM ASP in your time zone.

• In most cases, all of the PLM ASP's clients share a common code base, so you can't delay or skip an upgrade. Whether you're in the middle of a time-critical project or simply satisfied with your software, you'll still be getting your new upgrade (and possibly re-training, data conversion, and new bugs) with everyone else.

• If you're not happy with your PLM ASP, check your service contract and practice your diplomatic skills before asking for any help in moving your data to a competing PLM system. 

A PLM application service provider may be the only reasonable alternative for your company, but you'll want to anticipate all of the ways the arrangement could fail, and make appropriate contingency plans.

PLM0038 Rev 2007-08-24 16:46:33 -0700

Home

An orientation
to PLM

Investigating
and adopting
a PLM solution

Creating
simple and
flexible PLM

Standards &
guidelines
affecting PLM

PLM references
& links

Glossary of
PLM-related
terms

Site search

Contact & Legal Notices

PDXpert PLM software for growing companies