What is the better ERP licensing model.
4 Aug

What is the better ERP license model

While it has long been the trend in everyday use to "subscribe" to software (see Spotify and Co.) and Adobe and Microsoft have also been able to count their products among a subscription customer base for years, ERP providers and users usually stick to the classic licensing models. Mostly. There are already some ERP providers who have expanded their licence model offerings. However, the strategy differs in terms of customer orientation and customer loyalty.

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The classic licensing model for ERP software

In the classic licensing model, a distinction is made between "Named-" and "Concurrent users". In the case of "Named Users", each user must obtain a separate licence to use the ERP-system. With concurrent users, the customer has a certain number of licences at his disposal. This number determines how many users can use the system simultaneously. This number cannot be exceeded. Since the concurrent user model usually requires fewer licences, the prices of the individual licences are usually more expensive. For a company, this variant is particularly worthwhile if only a few users work in the system at the same time, but there are many users in total. It is also advantageous because the individual licences do not have to be laboriously overwritten from one user to another or new licences purchased, as is the case with the "named-user" model.

The classic licence models can also lead to greater expenses on the customer side if a distinction is made between different licences, e.g. full or partial licences). In addition, a "classic" licence is usually a one-way model and cannot be exchanged, returned or resold. In the case of an exchange for another ERP product, the licence investment can only be written off. Thus, the classic licence models become a good means of customer retention. Dynamic companies that change quickly are therefore more likely to suffer disadvantages if they bind themselves to these rigid models.

New licensing model for ERP systems

A good alternative is the subscription model, which is still new in the ERP sector. Here, the customer pays a fixed price for a certain range of functions for a certain period of time. Separate services, such as configuration advice or training, can be purchased separately. In this case, a Software subscription not necessarily be a cloud solution. However, this variant in the subscription combination offers the greatest advantages for companies, as they can make use of service offers quickly and easily. This makes the software more reliable and flexible. Depending on their needs, customers can adapt, exchange or cancel licences. Depreciation is no longer necessary.

Classic vs. new?

The comparison between the classic licence model and a subscription model for ERP solutions is not entirely simple. The services in the classic models, such as updates, are often provided by the customer. Therefore, the service in the subscription model often appears more expensive. In the long run, however, flexibility and sustainability are more beneficial for most companies in the subscription model. The forecast therefore clearly tends towards subscription models - also in the ERP sector.

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