Gartner Research

Digital Business Requires a Change in Software Licensing Models or Higher Costs Will Prevail

Published: 24 April 2014

ID: G00262031

Analyst(s): Alexa Bona , Lori Samolsky


IT procurement professionals must adapt their contracts and ways of working to new digital business requirements driven by the Internet of Things, wider use of mobile devices and digital innovation projects. Use of older software procurement methodologies will increase cost and project risks.

Table Of Contents
  • Impacts


Impacts and Recommendations

  • Digital innovation projects will require IT procurement professionals to negotiate much shorter contract terms and increase their ability to switch providers quickly and easily
    • Software contracts for digital innovation must have the potential to be shorter
    • Software contracts for digital innovation should anticipate much more frequent switching of products and services and even of providers
  • To contain software costs for digital innovation projects, IT procurement professionals will have to improve their skills in managing increasingly prevalent nonperpetual subscription models and demand genuinely usage-based pricing
    • Subscription licensing growth will continue to accelerate
    • Renewal terms will impact future prices and usage terms in subscription models
    • Subscription models are not automatically usage-based
  • Digital innovation based on the Internet of Things will substantially increase software costs if software is licensed by device, so IT procurement professionals need to negotiate alternatives proactively now
  • Mobile computing requirements driven by digital projects will cause duplication of software costs because of overlaps in mobile technology bundles
    • Existing software licenses might not cover mobile device usage, so additional fees might be charged
    • Mobile app development and deployment options are growing rapidly, making it more likely that you will be charged twice for the same capability in different bundles or deployment options

Gartner Recommended Reading

©2021 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form without Gartner’s prior written permission. It consists of the opinions of Gartner’s research organization, which should not be construed as statements of fact. While the information contained in this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research organization without input or influence from any third party. For further information, see Guiding Principles on Independence and Objectivity.

Already have a Gartner Account?

Become a client

Learn how to access this content as a Gartner client.