The second-hand software market is booming as more and more businesses come to understand what an effective way it is to save money. Very few businesses don’t require some software to operate effectively while most are always looking for ways to save money without affecting operational performance. That’s what pre-owned software offers, effective software for a lot less money!
Although perpetual software licensing is still available, Microsoft, like other vendors, is aggressively pushing their subscription platforms to their customer base. Conventional Microsoft resellers, distributors and managed service providers are handsomely rewarded for facilitating migrations with larger rebates and margins on offer when compared to perpetual licensing. From the software manufacturer’s and reseller’s point of view, this business model makes perfect sense as it provides an increasing regular income stream but is it the most cost-effective for the end-user? There is no doubt that a product like Office365 is a good solution for users requiring access from various devices and high levels of collaboration and mobility, or who just always want to be using the latest software version. It is also sold on its flexible scalability and seemingly lower costs but if the question is asked, ‘is this the most cost-effective solution whilst giving everyone the functionality they actually need?’, the answer is invariably, ‘no’.
Let’s examine the costs of a subscription model vs. the more traditional single payment perpetual licensing by comparing on-premise Office Professional Plus and its subscription equivalent Office365 Pro Plus. According to Microsoft’s own website, O365 Pro Plus costs £11.50 per month (annual commitment) which equates to £138 per annum, per user. When you compare this to the upfront single payment of around £440 for the perpetual device-based Office 2019 Professional Plus, on the face of it, the subscription option looks like a cheaper option. However, when you start amortising the costs over the typical lifecycle of the software, a very different picture starts to develop.
In the past, the average lifecycle for a product like the Office suite was around 6 years, though some businesses would refresh sooner after 3 years (when a new version is released). However, some would use the software for a lot longer - sometimes until the end of a manufacturer extend support, and beyond.
The table and chart above clearly show that if a business continues to use the same Office suite after 3 years, the perpetual licensing model becomes more cost-effective.
Now let’s compare perpetual pre-owned software against its subscription alternative. It’s worth bearing in mind that the beauty of pre-owned licensing is that it doesn’t experience any wear and tear as the software will be exactly the same as the first user installed - as if you had purchased it new from Microsoft. Pre-owned software also gives the option to purchase your preferred version, not just the latest offering from the manufacturer. Very often, a previous software edition will give more than enough required functionality but for less. Below we’ll compare both Office 2019 and 2016 Pro Plus against Microsoft’s subscription offering:
As you can see, the pre-owned Office 2016 is already less than the annual subscription of Office365 Pro Plus and it overtakes the cost of pre-owned 2019 in the first half of year two. At the end of year three, the subscription has cost £245 more than the perpetual pre-owned 2019 version. Once you start multiplying these costs by the number of users, it soon starts to add up. For a small business of ten users it is a few thousand pounds, but for an organisation of 1000 seats who would normally use their software for six years, the saving is in the region of £700,000 if they opted for Office 2016. The other benefit of owning your software licences is that once you’ve finished with them, there’s always the chance of getting some residual value for them by selling them back into the pre-owned software license market.
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