Software Licences Explained

Having spent the best part of my career in the sale installation and support of Point-of-Sale (POS) Software for Small to Medium sized businesses one of the leading questions I come across is how much will this software cost me and are there any ongoing fess associated with your software. I am fortunate that we provide our products in various offers so in many cases my answer will be a yes and no.

The most common way we provide software today is on a Monthly Subscription, however IdealPOS can also be purchased via an Annual Subscription or a Perpetual Licence. Below I will go into more detail about each.

Monthly Subscriptions:

In todays market Monthly Subscription is easily by far the most common way to pay for the use of POS software. In essence it is a pay as you go subscription in which you are able to use the software as long as you commit to paying an ongoing monthly fee. Usually, it is understood that when you stop paying the monthly fee your ability to use the software ceases.

In most cases there are no lock in contracts however some software providers will make you commit to a minimum term whether it be 12 months for example, this is becoming less prevalent however.

Annual Subscriptions:

As with the above an annual subscription is pretty much as its name implies you subscribe to use the POS for a 12-month period and at the end of 12 months you renew for a further 12 months.

In most cases in particular IdealPOS by subscribing to a 12-month term this will be cheaper than if you choose a monthly subscription.

Perpetual Licences:

Perpetual software licences used to the normal in providing software to an end user, however now this is not an option anymore for most software vendors.

A perpetual licence is basically paying a once off fee or buying a licence to use software in perpetuity, meaning there will be no ongoing costs for a business to use a POS system.

By choosing a perpetual licence option your initial capital investment will be significantly higher than any of the above Subscription options.

Which option is best for your business:

To elaborate on the above comment of initial capital investment, perpetual software licences can often cost a business many thousands of dollars for the required number of perpetual software licences. By choosing a monthly or annual subscription a business can significantly reduce the initial capital cost to use the software.

Often for new business start-ups that require a POS system, cash is in tight supply so often we will see them chose either a monthly or annual subscription.

Existing businesses that may have the ability to afford Perpetual licences will often choose this option in order to avoid any ongoing monthly fees.

There is one important thing to remember however is that a perpetual licence will always be the cheapest option in the long run.

For example:

Based upon 1 x POS full licence (Back Office and POS) including Eftpos Integration Excluding GST.

Note: The above table does not take into account any support costs that are usually, but not always additional to the above.

Why Monthly Subscriptions:

Most POS software providers will always recommend the Subscription base for the sale of their software for the ongoing revenue stream that this provides, and yes whilst the above table shows that over time this costs the user more money the reason for this is quite simple.

All software companies have overheads and in the case of a software development business the most important overhead is Human Resources in the area of Software coding and development. For a POS software company to remain competitive and provide enhancements to their product to reflect new integrations and trends, the software needs to be continually developed and new features to be consistently added to the software.  Constant revenue streams provided by a subscription model means the company is not purely relying on new sales to keep the development team employed as once was required before the subscription model become main stream in the 2000’s.

Conclusion:

In the context of starting with a new POS system there are also other costs to be considered such as is their support available, what hardware will be required as so on, these will always be a deciding factor in which software a business chooses to use that I have not covered in the article, here I am purely focusing on software licencing costs.

Again, each business depending on their requirement will choose what best suits their needs  and if you would like any further information or would like to discuss any of the points raised in this brief run down of the differences about the various licences please do not hesitate to contact one of the experienced team at Metropolitan Cash Register.

Rob Redfearn.