What are some common software pricing models?


There are many types of software pricing models, but broadly they can be divided into three categories: perpetual, subscription, and consumption.

Perpetual software pricing models, also known as perpetual licensing models, allow the software to be purchased for a one-time fee.  Typically the buyer has nearly unlimited use of the software in perpetuity.  If updates to the software are required, a separate software maintenance package may be purchased.

Subscription software allows unlimited use of the software for a predetermined period, often 1 year or 3 years, for a price.  Updates to the software are often included in the price of the subscription.  At the end of the subscription term, the buyer usually has the option to renew their subscription.

Consumption-based software allows the buyer to pay for their actual usage of the software during a period of time, for example monthly.  In this type of arrangement, the actual usage can vary from period to period, resulting in customer charges that vary as well.  Some customers like knowing that they will only pay for what they use, while other customers dislike the unpredictability of their bills.