To subscribe or not?  IT and CAD managers face many decisions in their day-to-day lives but surprisingly this can be one of the more controversial. 

A report from the analyst firm IDC says that 75 per cent of vendors' revenues come from traditional licences.  However, many vendors and customers think this will change.  Some 43 per cent of vendors and 26 per cent of customers believe that the majority of worldwide software revenues will be derived from subscription-based software by the end of 2010.

Yet, some still have an underlying fear of being "locked in" to a particular brand and see it as a ploy by vendors to secure their revenue.

Of course there will always be those who prefer to keep options open.  They want to upgrade their software only when they feel they are ready and are prepared to incur the upfront costs of licences and annual maintenance fees.  Yet, doing this has drawbacks other than cost.

For example, continuously having to make key buying decisions and forming new relationships with vendors and/or resellers can be time-consuming and unproductive.  And besides, there is a growing recognition that a shift of emphasis towards subscriptions could actually help vendors and customers alike - a win-win situation for all concerned.

So, how does an IT or CAD manager decide what is best for their company?

Long or short term?

The first question they should ask themselves is how long do they intend to use a particular solution?  If the answer is "less than three years", then they may be the better option to pay the upfront licence fee and decide on upgrades as and when they are needed.

If, however, the solution is long-term investment they need to think carefully.   A subscription could help dramatically cut long-term cost of ownership. 

For example, although Autodesk offers a subscription-only model for its new vertical products such as Autodesk Inventor, users of its industry-leading drafting tool, AutoCAD have the choice of subscribing or upgrading as and when they need.  As a comparison, currently the UK cost of upgrading one version of AutoCAD is around 60 per cent higher than that of subscribing.

Rolls-Royce Marine Electrical Systems based in Portsmouth has been an Autodesk customer for around eight years and has been on subscription for around half this time.  IT manager, Steve Buxey, says that he finds this way of working: "less worry, far cheaper and more efficient."

He continues: "It's difficult to quantify how much we save, but it's a substantial amount.  There are always special offers for subscription customers.  Overall, it must have saved us at least 50 per cent on our costs and I like the fact that there are no nasty surprises."

John Jervis of Autodesk reseller partner, Mice Solutions ltd, points out that it is this security that most subscription customers value most.  "Often it saves an IT manager from having to spend lots of time justifying their investment every time they want to upgrade.  They may have to present their case to the board.  If one particular year the company has other priorities, they can fall behind with the technology and upgrading becomes more expensive the longer it goes on."

Cutting through complexity

Demand for subscriptions is also being driven by the complexity of managing licence arrangements - particularly for larger companies which hold hundreds of licences.  A longer term arrangement with vendors, such as a subscription, can be beneficial in identifying, taking control and so budgeting for these.

This is just the reason another Autodesk customer, Munich Airport, finds a subscription-based model so beneficial.

The airport depends on precise planning and unbureaucratic procurement systems to get the best from its innovative computer-aided facility management which looks after its over two million square metres of floor space and 27,000 rooms.  Such complex and high-tech facility management demands forward-looking software planning.

In the middle of the year, head of CAD/CAFM at the airport, Wolfgang Haller submits his budget estimates for the coming year to the IT department.  Until recently, this budgeting process was time-consuming and yet still purely speculative.  For example, many unforeseeable factors had to be incorporated such as whether new versions of software were needed and how much this would cost. Haller and his team had to spend time ordering test versions so that they could come up with a fairly realistic quotation in good time.

However, if an estimate was off target, despite all the careful planning, they had to request a supplementary budget.

Haller identified that a subscription based arrangement would really benefit his department.  Stable prices during the subscription period enable reliable planning and help simplify budgets and an annual fee covers regular technology updates.

The fact that Autodesk also provides extended licence terms which allow use of previous versions of software on the same PC was another advantage.  "We could not develop without the simultaneous use of our old and new versions," he says.

Haller estimates that changing to this arrangement has reduced his planning and procurement workload by ten per cent and this is without the financial benefits.  "Any company can only benefit in time and money," he says.  "System changes do not happen overnight, especially for a major operation such as Munich Airport.  Once you have decided on a system, it does not make sense to have annual negotiations about licences."

It's worth noting too that most vendors have a package of benefits for their subscription holders.  These can offer privileges such as practical help to improving productivity - for example, e-learning programmes and online support. 

The total package

In summary, anyone making the decision whether to subscribe or not, should look at the total package.  Going back to that IDC report - in the same survey, 72 per cent of vendors and 70 per cent of customers said they believed strongly that the software industry should place a greater focus on clearly establishing the business value of software. 

But business advantage comes to those who take every opportunity to enhance productivity and the quality of their services.  The benefits of long-term thinking can often provide this edge.

As for whether the whole industry will move towards a subscription-only model, I'm keeping an open mind.  Personally, I believe the internet may have a role to play here.  With the increasing use of broadband, subscriptions may evolve so that users pay to access applications held on a vendor's server and this will give instant access to any new enhancements available.

Meanwhile, I recommend that IT and CAD managers take advantage of every benefit they can.  In return they will enjoy lower administration costs, more accurate budgeting and, importantly, new technology as soon as it becomes available.