Power to the People

By L. James Ashley

Subscription licensing might just be the competitive key SMBs have sought.

It is a misnomer that being a small and midsize business (SMB) means your challenges are smaller too.  Life isn’t simpler for the SMB.  In many cases the SMB is a specialized business that addresses issues that large enterprises aren’t equipped to handle.  This requires powerful tools, such as product development software, to help the SMB succeed.  Yet for the most part, software vendors license and sell their products in a way that is geared for the large enterprise and cost prohibitive to the SMB market—with the exception of companies like CoCreate that have embraced subscription licensing.

Subscription licensing lets companies rent versus buy software, which dramatically lowers the cost of bringing new applications into a company. It not only lowers the financial risk of purchasing new software, it also provides the flexibility to easily expand to fluctuating demand and keeps more cash available for other parts of the business.  It’s not surprising to find subscription licensing being offered by a software vendor within the manufacturing industry.  After all, it’s the same industry that embraced just-in-time (JIT) inventory management with the same benefits of increased flexibility, reduced costs, and freed up capital.
 
In a recent AMR Research report, 23% of the executives surveyed indicated that their preferred method for purchasing enterprise applications is on demand, or subscription based licensing.  That is a big shift from the 9% currently purchasing software as subscription today.  The report goes on to discuss that users are ready for this now, but most software vendors are not.  There are exceptions, and CoCreate is one of them. It is the only CAD/PLM provider to offer its software in the three licensing forms of subscription, hosted, and perpetual licensing.

PDG Oncore saw the value immediately.  PDG Oncore is  a contract product engineering firm that brings valuable design capabilities to companies for the creation and manufacture of consumer-class products that are produced in high volumes and low costs.  Established at the start of 2005, PDG Oncore needed to provide its engineers with powerful 3D design capabilities while balancing their cash flow as a young company.  They found their answer with CoCreate’s subscription licensing which lowered the upfront expense of a new software purchase and kept cash available to feed other parts of their growing company.  

Another example is Engine Works, an Illinois-based industrial engine provider that recently made the move from 2D to 3D design.  As a small to midsize business they sought to gain all the benefits that come with 3D CAD: replacement of physical prototyping with virtual prototyping, greatly increased design accuracy, and clear communication with clients by working with lifelike 3D models.  As a smaller company, Engine Works also sought to reduce both the expense of a new software purchase as well as the risk.  Having heard horror stories from other suppliers in his industry on their efforts to move to 3D, Fred Story of Engine Works wanted a low risk way for a 3D modeler to prove itself for his company.  Subscription licensing from CoCreate was the answer for Engine Works.  Not only did CoCreate’s 3D CAD prove itself as an easy to learn yet powerful design environment, it did so under Fred’s rules: low cost, low risk.
 
Subscription licensing is taking hold because it gives SMBs more choice in the applications that can be cost effectively brought in-house.  It also has a nice side effect in that it forces software vendors to be even more focused on the customer because every year their software is up for renewal.  Greater purchasing flexibility and customer focused software, now who can say “no” to that.  
 
L. James Ashley has been writing about high-tech for more than 25 years. He says it all started with a soldering iron. Send your thoughts about this article via e-mail by clicking here. Please reference “Subscription Licensing, March 2006” in your message.

AMR Research
Boston, MA

CoCreate Software, Inc.
Fort Collins, CO

PDG Oncore
San Diego, CA

Engine Works, Inc.