What Is a Perpetual Software License?

A perpetual software license is a license that lets individuals use a particular computer program for an indefinite period. So, as long as it does not get terminated, the license allows the owner to use a particular software version continuously without paying a single cent.

Today, not many vendors use the model. Instead, they shifted to subscriptions, which gained popularity among customers since they do not require paying high costs upfront. Vendors, meanwhile, cannot ensure the model’s profitability due to unforeseeable future development costs related to updates and upgrades.

Read More about a Perpetual Software License

Learn more about the license—how it works, its pros and cons, how it differs from the subscription model, and more—in this post.

How Does a Perpetual Software License Work?

Customers who buy the license pay an upfront charge. With that comes supplemental support (e.g., technical support and updates) for a limited period and other benefits like future discounts. For example, when the support period ends, they can keep the current version without additional support, pay a lower fee for support and upgrades, or buy a license for a new version at a discounted price.

You can compare purchasing the license to buying a washing machine or kitchen appliance. Your one-time payment lets you use it as long as it lasts. And it typically comes with a warranty and free service for a limited time.

How Does a Perpetual Software License Differ from a Subscription?

Obtaining a perpetual software license primarily differs from subscribing to an offering in terms of how customers purchase them. Let us tackle their differences by looking at a specific example known to many computer users worldwide—buying Microsoft Office 2024 or subscribing to Office 365.

PERPETUAL SOFTWARE LICENSE	SUBSCRIPTION
Applicable to Office 2024	Applicable to Office 365
One-time purchase costing US$149.99 for one device; can last for years unless the software reaches its end of life	Personal subscription for up to five devices for US$9.99 a month; can typically be canceled anytime

What Is a Perpetual Subscription?

Did you know that there is such a thing as a perpetual subscription? Many consider this a third option. In this case, customers enjoy the benefit of not worrying about failing to renew their subscriptions because these are set to automatically renew at regular intervals.

What Benefits Come with a Perpetual Software License ?

Purchasing the license can provide advantages to vendors and customers alike.

PROS FOR VENDORS	PROS FOR CUSTOMERS
Unlike subscription models that let buyers cancel anytime—creating uncertainty in revenue forecasts—perpetual licenses offer vendors greater revenue stability with upfront, committed payments.	The license can cost less than a long-term subscription if customers plan to use the software for an extended period anyway.
Owning the license loosely translates to product “loyalty.” That presents upsell opportunities and, therefore, extra income, to vendors.	Owners of the license gain more control over upgrades and other features than subscribers.
Some customers do not want to be bothered with renewals, giving vendors who offer the license a competitive advantage.	Vendors can hike up subscription costs anytime unlike perpetual licenses that are available at a particular price upon purchase, ensuring cost predictability.

What Challenges Can Owning a Perpetual Software License Present?

Like any other software purchasing model, the license comes with disadvantages.

CONS FOR VENDORS	CONS FOR CUSTOMERS
Making staggered payments can be a lot easier for most buyers, enticing them to opt for a subscription rather than a one-time purchase.	At first glance, customers need to shell out US$140 more upfront to buy Office 2024 than subscribe to Office 365.
Vendors find it more challenging to roll out updates and changes to products and pricing schemes.	Not all vendors offer one-time purchases for particular software.
	Customers who do not renew their support contracts may find it harder to update and maintain their software.

What Kinds of Software Are Sold with Perpetual Licenses?

Three types of software typically come with perpetual licenses—on-premises enterprise software, operating systems (OSs), and security-sensitive products.

Kinds of Software Sold with Perpetual Licenses

On-Premises Enterprise Software

This category includes the enterprise resource planning (ERP) and customer relationship management (CRM) software organizations use for internal operations. The license allows each company to customize the program to suit their specific requirements. Many businesses prefer to host these applications on their infrastructure for complete control over them and the data they contain and process.

Operating Systems

This umbrella includes software like Windows, macOS, and Linux that computers use to manage hardware and provide a user interface (UI). They are typically sold with perpetual licenses locked to the hardware they were initially installed on.

Security-Sensitive Products

This classification includes security-sensitive products like encryption software or secure communication tools. Many organizations must abide by stringent privacy regulations like the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA). Software with perpetual licenses offer greater control, allowing them to maintain specific versions audited or approved for their security protocols.

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Some predicted that the software-as-a-service (SaaS) or subscription model would make perpetual licenses obsolete. But that may not be the case, especially if data privacy regulations become more stringent over time.

Key Takeaways

A perpetual software license lets individuals use a particular computer program for an indefinite period.
Obtaining the license primarily differs from subscribing to an offering in terms of how they are purchased.
Purchasing the license can provide advantages to vendors and customers alike.
On-premises enterprise software, OSs, and security-sensitive products often come with the license.