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Cloud-based applications and services seem to represent a win / win scenario, if ever there was one. Users experience the benefits of broader accessibility and enhanced collaboration, while the organization’s IT staff enjoy faster deployment and easier management.

For organizations of all sizes, cloud-based applications and services are providing easier and more efficient access to the functionality they need. Aberdeen’s study found that:

  • Three out of five (58%) of the leading performers were able to provide better support for users, regardless of their location, by using cloud-based services
  • Three out of five (57%) of the IT departments that had deployed Software-as-a-Service applications reported a reduction in application-related expenses
  • One-third (32%) of the leading performers were able to reduce capital expenses by adopting cloud-based services
  • One-third (35%) of all respondents reported moving to the cloud because they saw greater value in a software subscription model

This last point – the transition from traditional software licensing models (perpetual product licenses, plus separate fees for support contracts and product upgrades), to a software subscription model – is something that organizations should be thinking through for future budget cycles.

For the enterprise, some of the benefits of software subscriptions include:

  • Immediate access to the latest functionality – subscribers always have access to the latest capabilities, which eliminates the need to plan and budget separately for upgrades, and increases efficiency by having all users working with the same version.
  • Enhanced mobility, sharing and collaboration capabilities – software subscriptions are usually synonymous with mobile apps that extend the utility of traditional desktop applications, and the ability for creative users to sync and share information across any supported device, regardless of their physical location.
  • Predictable cost for IT infrastructure – from the organization’s perspective, the subscription model eliminates the high upfront cost of traditional licensing; many organizations prefer the predictability of an ongoing operating expense as opposed to the “lumpiness” of irregular capital expenses.

In the long term, a successful transition from traditional licensing to software subscriptions is in the strategic interests of the solution providers as well. Managers and investors are attracted not only to the predictability of revenue streams from a subscription-based business model, but also to the opportunities for speed and efficiency of developing new features based on a common application delivery platform.

For a more detailed discussion, see my report called Market Alert: Putting Software Subscriptions in Perspective.

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