CA switching to subscription-based licensing

Old wine in a new bottle: That's the reaction from analysts to a new subscription-based software pricing scheme announced Wednesday by Computer Associates International.

          Old wine in a new bottle: That's the reaction from analysts to a new subscription-based software pricing scheme announced Wednesday by Computer Associates International.

          Under the new approach, users will be able to buy CA products via a monthly subscription method instead of licensing specific packages for a predetermined number of employees. CA officials say the subscription-based sales model will let users vary the mix of software that they use as their business and technology needs change, as long as they stay within the overall dollar value of their contracts.

          Sanjay Kumar, CA's president and CEO, says the new scheme was developed after users "told us they need more flexibility in how they license software and a faster, simpler, more cost-effective way to do business with us." It's also an attempt to give CA a more predictable revenue stream, he adds.

          Kumar says executives at the software company hope that the new licensing model "eliminates the back-end-loaded nature of our business, where most licence agreements are concluded in the final days of a quarter." For example, he points out that more than $US1 billion of CA's $US1.6 billion third-quarter revenue total came in during September.

          The new pricing model should give mainframe users more flexibility to define the length and dollar value of their licensing contracts, according to analysts. And large users may be able to derive better discounts when they enter into long-term agreements with CA through the subscription-based approach, they add.

          But the new scheme does nothing to address long-standing and far more crucial user demands for cheaper usage-based software pricing, says Carl Greiner, an analyst at Meta Group.

          "The bottom line is that this is something that's meant more for Wall Street than for users," Greiner says. "From a customer point of view, nothing really has changed." That's because pricing will still be based on the overall capacity of a mainframe installation, he adds. Discounts will also depend on the length of a contract and its dollar value -- just like before, Greiner says.

          "At first blush, it certainly sounds like this will be something that makes it simpler [for users to buy software from CA]," says Richard Ptak, an analyst at Hurwitz Group.

          "But it doesn't look like it is going to do a lot for [users] who are much more usage-sensitive and want to be tied into a pay-for-play pricing model."

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