This software glossary is intended to help prospective buyers understand key software terms about licensing, deployment, the difference between applications and features and more in order to aid in the process of evaluating new systems. To learn more, visit our website or call us for a Free FastStart Consultation: (888) 234-5187.
Licensing Models: Perpetual vs. Subscription
Perpetual license: The user pays an upfront fee to own a software program and use it indefinitely. This licensing model is most common with on-premise software deployments (see below).
Additional, annual recurring costs are often involved—including fees for maintenance, support and updates/upgrades, which may cost between 15 and 20 percent of the license price. Since they are charged one time and upfront, initial costs for perpetual licenses are typically higher than those for subscription-based licenses; however, the recurring costs tend to be lower.
Subscription license: The user does not own the software; rather, it is owned, delivered and managed remotely by a vendor or service provider and made available to subscribers through the internet, or other network. Subscription-based licensing is typically associated with cloud-based deployment (see below).
The license to use the software is granted for a specific amount of time. Pricing may be based on the number of users who need to access the system, or the amount of storage space needed. (A “per-user, per-month basis” is most common.) Pricing may also fall under a “use basis” model, in which a set number of transactions are allowed for a fixed time period, or in which users are charged each time they access the software.
Since the cost of the subscription fee is spread out over time, upfront charges are generally substantially lower than those associated with perpetual licenses. However, recurring monthly or annual fees for support and maintenance are typically higher.
It should be noted that over time, costs for the two types of license models (as well as for the two types of deployment models) tend to converge.
Deployment Models: Cloud-Based vs. On-Premise
“Deployment” describes the processes involved with getting new software or hardware delivered, installed, configured, tuned, tested and operating correctly for the end users.
Cloud-based deployment: Systems using a cloud-based deployment model deliver “Software-as-a-Service” (SaaS). This is also known as “web-based software.” In this model, the software is hosted (meaning housed, served, maintained and delivered) remotely, on the vendor’s or service provider’s own servers. It is then accessed by users through any device that is both compatible with the system and has an internet connection.
The vendor/provider is in charge of maintaining the web application used to access the software and handles all daily operations of the application; users are responsible only for the content of their own accounts. This type of software is typically, but not always, licensed under a subscription-based model.
On-premise deployment: The software system is hosted in-house, on the user’s own servers. Data in the database and all associated applications are housed and run locally, and users may or may not be able to access the system remotely (depending on whether or not the system is compatible with mobile devices and remote computers).
The user is responsible for performing maintenance, updates and upgrades, as well as for delivering the software and its wireless and network access points. This type of software is often, but not always, licensed under a perpetual model.
Integrated Suite vs. Best-of-Breed
Software products may be packaged and sold in many different ways, but here are two of the most common:
Integrated suite: A bundled package of different, yet related, software applications offered by one vendor. While each of the applications performs a different function, data and processes are typically integrated or shared across them.
Microsoft Office is an integrated suite you’re probably familiar with. It includes a bundle of applications, such as Word, Excel and PowerPoint. While these applications all perform different functions, they work together seamlessly. For example, data in an Excel spreadsheet can be embedded within a PowerPoint presentation, which will be updated every time the spreadsheet itself is updated.
Best-of-breed: A “best-of-breed” product refers to one application, sold individually, that performs one specific function very well. While best-of-breed products may also be sold as part of integrated suites, they do not rely on the other applications in the suite in order to function.
For example, Microsoft Word is a best-of-breed word processing application. Though it is also offered as part of the Microsoft Office suite, it can be purchased separately and can stand completely on its own.
Suite, Application, Module and Feature
When reading about software products, there is a “hierarchy” of functionality that you may see described. Integrated suites, as discussed in the previous section, sit at the top of the hierarchy, while applications, modules and features, respectively, sit below:
Module: A set of features that comprise one part of the application functionality—helping you complete one step of the greater process that the application was designed for. So, within the Excel application, “functions” (the name for the broad set of calculations you can program Excel to perform for you) could be considered a module.
Feature: A tool that helps you do just one, really specific thing that supports the overall purpose of the module and application (the most granular level of the hierarchy). In our Excel example, the “sum” function would be a good example of a feature.
This differs from functionality, which is a more general term that describes “the sum or any aspect of what a product, such as a software application or computing device, can do for a user.”