Software Pricing – Software License/Annual Fees

One of the biggest questions we get is – “How much will the software cost?” There are actually 3 components to software pricing – Software License/Annual Fees, Software Implementation, and Annual Maintenance or Fees (for a Cloud solution). This post will focus on Software License/Annual Fees – which is the up front license cost for on-premises solutions, or annual fees for cloud solutions. Most vendors price according to the modules required, plus the number of named or concurrent users that will be accessing the system. Named users are anyone who may access the system at any time. Concurrent users are the number of users that would be on the system at the same time. As you provide the vendors with user information do not overestimate the number of users because that directly affects the price of the software. (You also don’t want to underestimate the number of users so you have enough licenses to run the software!)

This license/fee is paid upfront and kicks off the implementation process. If you are implementing an on-premises solution – after the initial license is paid, you will pay annual maintenance fees (typically 20 – 25% of the initial software license) for upgrades and some level of support. But you have the option of not paying maintenance and operating the system independently. If you are implementing a cloud solution, you will be paying the annual fee to access the software and need to keep paying that fee in order to maintain access to the software.

We typically find that the vendors provide an up-front discount for the license or annual fee – particularly if you put the vendors in a competitive situation. But you need to also look at the other factors – including implementation, annual maintenance/fees, upgrade costs, etc. over at least a 5 year period to properly determine the total cost of ownership.