Brief Introduction to Financial Implications and Comparison of Purchasing Permanent Software Licenses vs Subscription Licenses, including possibilities for cost optimization. For more please see: https://www.vizor.cloud/blog/financial-implication-of-switching-to-cloud-subscriptions/

1. OPTIMIZING FINANCIALS
CLOUD & SUBSCRIPTION
SOFTWARE LICENSING
ERICK YANEZ
CEO
VECTOR NETWORKS

2. 1. Financial Implications Permanent vs Subscription
2. Cost Over Time Permanent vs Subscription
3. Suggestions on How to Optimize Subscriptions
Table of Contents
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3. Permanent Software Licenses
– Multiple benefits
– Rigid model
Subscription Model
– More flexibility and possibilities
Could help reduce costs
– Requires more management
Permanent vs Subscription - Financial
3

4. Permanent vs Cloud / Subscription
Capital Expenditure Operating Expense
OPEX costs
Financial Perspective of Subscriptions
4

5. Financial Implications of Each Model
5
Permanent Subscription
Cash flow  
Assets in Balance Sheet  
Short term operating
income
 
Cost Over Time  
Tax Benefits  

6. or ?
Depends on many factors such as:
- Financial Needs of the Organization
- Board of Directors
- Public / Private
- Industry (utilities, energy, tech startup)
Which One Is Better?
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7. Financial Implications of Each Model - Focus
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Permanent Subscription
Cash flow  
Assets in Balance Sheet  
Short term operating
income


Cost Over Time  
Tax Benefits  

8. Permanent: less expensive over time
Subscription: more expensive over time
Permanent vs Subscription - Common Approach to Consumption
0
1
2
3
4
5
6
7
year 1 year 2 year 3 year 4 year 5 year 6
Cost
Cost Over Time
Permanent
Subscription
Total P
Total S
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9. 0
1
2
3
4
5
6
7
year 1 year 2 year 3 year 4 year 5 year 6
Cost
Cost Over Time
Permanent
Subscription
Total P
Total S
Permanent: less expensive over time
Subscription: more expensive over time
Permanent vs Subscription - Common Approach to Consumption
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Can Subscription be less
expensive?

10. • Trend
• May become the only option
• Characteristics:
– Scalable and Elastic
– Metered by use
– On demand pricing
– Faster deployment
– Option to switch products
The Subscription Model
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11. Can Subscriptions be Less Costly?
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Variables of
Dynamic
Organization
# of employees
# of projects
# of customers
Other fluctuations
HiddenCosts
Upgrades
Scale up

12. Can Subscriptions be Less Costly?
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Variables of
Dynamic
Organization
# of employees
# of projects
# of customers
Other fluctuations
HiddenCosts
Upgrades
Scale up

13. • Regular Hardware and Software Upgrades
• Hardware upgrades to scale up
• Software upgrades to scale up
Windows, SQL Server, etc
Licensed CPUs, memory, number of users, etc
non-linear increments
volume discounts marginal in comparison range
Hidden Costs of Permanent Licensing
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14. HiddenCosts
Upgrades
Scale up
Can Subscriptions be Less Costly?
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Variables of
Dynamic
Organization
# of employees
# of projects
# of customers
Other fluctuations

15. Ex: Costs Perm vs Subsc – Dynamic Org
1 2 3 4 5 6 7 8 9 10 11 12
Number
of
Users
Month
Costs per Month – Permanent vs Subscription
Costs Dynamic
Costs Permanent
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16. Area in blue = $ savings
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Ex: Costs Savings Perm vs Subsc – Dynamic Org
Potential Costs Savings Area – Permanent vs Subscription
Costs per Month

17. • Vendor Limitation
– 3 month minimum
• Buy more any time
1 2 3 4 5 6 7 8 9 10 11 12
Number
Of
Users
Month
Costs per Month – Permanent vs Subscription
Number of Users
Costs Permanent
Costs Dynamic
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Ex: Costs Perm vs Subsc – Dynamic Org - Vendor Limitation

18. Area in blue = $ savings, Area in orange = $ waste
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Ex: Costs Savings Perm vs Subsc – Dynamic Org – Vendor Limitation
Potential Costs Savings Area – Permanent vs Subscription
Costs per Month

19. • Identify software licenses tied to dynamic variable in your
organization
– Users
– Projects
– Customers
If does not change, no case
• How often your number of licenses change?
– Hires
– Leaves
– Change job positions
Suggestions: How to Optimize?
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20. • Establish processes to remove licenses
– Orgs keep them
• Validate Usage
• Automate
Suggestions: How to Optimize? - Continuation
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21. Dynamic Variable:
 Change Positions
 New Hires
 Leaves & Terminations
Needs change
Permanent Licensing:
Future cost increased with every peak
Subscription Licensing:
Opportunity for saving
Dynamic Organization
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22. Dynamic Variable:
Changes every week, month, year?
Permanent Licensing:
Stable
Subscription Licensing:
Opportunity for saving if more often
Dynamic Organization – How Often?
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23. Establish processes for removing licenses when …
• Person removed from
Active Directory
• Person removed from
Human Resources
system
• Mainly Job Position Changes
– overlooked
Remove Licenses
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24. Ideally:
• Managers define mandatory software
• Validate if users still need software
• Validate again every X time
– Once every year, etc.
Validate Usage
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25. • Vendors don’t offer true cost agility:
ask for what you need
• Difficult to track changes
– hires, job changes, leaves
• Adding and removing licenses
inside the software may not be
simple
• Labor costs could significantly reduce savings
Main Challenges When Optimizing
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26. • Select your preferred model
Permanent vs Cloud / Subscription
• Evaluate your options
• Identify software solutions that offer elastic pricing aligned to
your variable
• Keep track of allocation per user
• Validate what users need the software
• Remove licenses after changes in your HR system or AD
• Add and remove licenses promptly in the software
• Automate
Conclusions
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27. Thanks – Questions?
ERICK YANEZ
erick.yanez@vizor.cloud
linkedin.com/in/erickyanez
770-622-2850
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