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Comparison

Software licence vs subscription: what is the difference?

A perpetual licence, a subscription and a SaaS service can all be called licences, but they work very differently when it comes to cost, updates and what happens if you stop paying.

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In short

Software licence vs subscription: a perpetual licence is paid for once and lets you use a version indefinitely, with updates under a separate maintenance plan. A subscription is paid per period and stops when you stop paying, but includes updates and support. SaaS is a subscription to a service the vendor hosts. Much business software is now sold only by subscription.

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Three ways to pay for software

  • Perpetual licence: a one-off payment for the right to use a specific version indefinitely, usually installed on your own computers or servers. Updates and support come from an optional maintenance or support agreement, renewed each year.
  • Subscription licence: a recurring payment, monthly or annual, for the right to use the software while you keep paying. Updates, new versions and support are normally included.
  • Software as a service (SaaS): a subscription to an application the vendor runs in its own cloud. You use it in a browser or app rather than installing it on your servers, and hosting, updates and availability are the vendor's job.

The line between the last two has blurred. Many subscriptions now include cloud services, and many SaaS agreements still use the word licence for your right to use the service. What matters is what you are paying for and what happens when you stop.

Side by side

Perpetual licenceSubscriptionSaaS
How you payOnce, plus optional yearly maintenanceMonthly or annuallyMonthly or annually, sometimes on usage
If you stop payingUsually keep using the licensed version, without updatesRight to use ends, and the software usually stops workingAccess to the service ends; check the terms for data export and retention
Updates and new versionsOnly with maintenanceIncludedIncluded, applied by the vendor
Where it runsYour devices or serversYour devices, often with cloud servicesThe vendor's cloud
Scaling up or downBuy more; reductions do not refundAdd any time; reduce at renewal or monthlyAdd any time; reduce at renewal or monthly
Typical examples todaySome on-premises server and specialist softwareEndpoint protection, PDF editorsGoogle Workspace, cloud backup, email security

For the wider set of models, including usage-based, term, free and open source licences, see software licensing models.

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Capex or opex?

Finance teams often ask whether software is capital or operating spend. As a general rule, a perpetual licence bought outright is more likely to be treated as a capital purchase and recognised as an intangible asset, while subscriptions and SaaS fees are usually treated as operating costs as the service is used. Implementation costs for cloud services raise questions of their own.

The right treatment depends on the accounting standards you report under and the specific terms of each agreement, so treat this as background only and check with your accountant before you budget or report. From a buying point of view, subscriptions spread cost over time and make it easier to scale, while a perpetual licence can be cheaper over a long life for software that changes slowly, provided it stays supported.

Is SaaS a software licence?

A SaaS agreement is typically framed as access to a service the vendor runs, rather than a licence to install and run your own copy of the software, although the exact legal position depends on the contract. In practice the terms often still talk about licences, seats or subscriptions, and the commercial questions are the same: how use is counted, how long the term is, how it renews and how you get your data out at the end.

That last point deserves attention. With a perpetual licence your data stays on your systems. With SaaS it sits in the vendor's service, so check export options, retention after cancellation and whether you need independent backup; see business backup software.

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Which should you choose?

Often the choice is made for you: many security, backup and productivity vendors now sell only subscriptions or SaaS. Where you do have a choice, a subscription usually suits software you rely on for security or collaboration, because updates are part of the price. A perpetual licence can still make sense for stable, on-premises software, as long as you budget for maintenance and replace it before it falls out of support.

Whichever model you buy, the term matters as much as the model: see monthly vs annual licences. We can set out the licensing of any product we supply before you commit. Contact us and ask us for a quote.

How Forever Systems supplies your software licences

Forever Systems Ltd supplies business software subscriptions to UK organisations from one account, with one monthly invoice and a UK team who know the products.

  • The right edition first time: we check what you need before you buy, so you are not paying for features you will never use
  • Monthly or annual terms where the vendor offers them, and help timing renewals and commitments
  • Licence changes handled for you: add or remove users, upgrade editions and true-up without starting a new contract
  • Deployment and support from engineers who run these products every day, not just a reseller account
  • Consolidated billing and renewal reminders so nothing lapses unexpectedly

We work with businesses, schools, charities and public sector organisations of all sizes.

Frequently asked questions

What is the difference between a software licence and a subscription?

A perpetual software licence is paid for once and normally lets you keep using that version, with updates only under a maintenance plan. A subscription is paid per period, usually includes updates and support, and your right to use the software ends if you stop paying.

Is a software licence capex or opex?

As a general rule, a perpetual licence bought outright is more often treated as capital spend and subscriptions or SaaS as operating spend, but it depends on your accounting standards and the agreement. Check with your accountant.

Is SaaS a software licence?

Not usually in the traditional sense: SaaS is typically framed as access to a service the vendor hosts, though agreements often still use the word licence. The commercial questions, such as how use is counted, the term and renewal, are the same.

Can I still buy perpetual licences?

For some on-premises software, yes, but many business security, backup and productivity vendors now sell subscriptions only.

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Next step

Need a licence quote or a second opinion on your renewal?

Tell Forever Systems what you need and we will come back to you by email with options, not a hard sell.

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    Tell us what you needA few lines is enough: your organisation, users or sites, and timescales.
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    We read it and reply by emailUsually within one working day, with options and clear next steps.
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    You decideNo obligation and no hard sell. We never sell your data.

Software Licensing UK is a website of Forever Systems Ltd, part of Forever Group. One account, one monthly invoice and a team who know the products.

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