Basically, a perpetual license is useless, because of technology changes. With a term-license, and a renewal fee, the vendor’s incentives and the purchaser’s incentives are aligned.

Besides, with a term license, the vendor is created a more realistic expectation for their customer.

In 1979 when I first started using a “word processor” the gold standard was WordStar. Microsoft had not even thought of Word yet and the operating system for these Micro Computers as they were known was Concurrent Dos or Unix or something similar. No such thing as MSDOS yet and windows was more than a decade away. I purchased a copy of WordStar and I’m sure I still own it but I seriously doubt I could find the hardware to run it now or the patience to use the formatting “Tokens” to place simple bold, underline, italics or font formats in place.

Software and operating systems have usually had a set life cycle just like hardware. Yes you can limp along for 10 years on a Medical Billing system written in the late 80′s for Late 80′s hardware but in 2009 it is very antiquated and often difficult to maintain as well as keep up to date with the latest interfaces and functionality. If you are still running an old “Legacy” system consider yourself lucky and about 10 years past the expected lifetime of the software. You made a smart decision back then. Now it’s time to move to a newer platform and get more functionality, speed and return on your next investment.

It would be nice if everyone could create a web app like what we now use to prepare our income tax online. But what had to happen before that could occur? The internet had to be developed and the browser had to become stable enough to support SaaS software. But more importantly you had to TRUST the website to stay around, to keep your information private, and to function flawlessly and quickly year after year as well as stay in business and not be bought out by a competitor. Of course I’m referring to Turbo Tax and not Kiplinger’s Tax Cut in case you were wondering.

SaaS software is not new.. It used to be called Timeshare software. You rented the software and could care less what operating system or hardware it was running on since you did not own the hardware. We have come full circle from the Medical software of the Late 60′s and 70′s where it was too expensive for a Physician to purchase a mainframe or mini computer and run their own servers. The service bureau of the 70′s is now the SaaS vendor of the 2000′s. Why did service bureaus move from the forefront? Why did physicians purchase the infrastructure in people, software and hardware to do their own billing? Back in the 70′s they used a peg board and ledger system and copied their ledgers as their monthly statement. So why are Physicians not using the ledger and pegboard system any more? Because there have been massive changes since the 70′s and early 80′s. Insurance is filed for your patients now, as well as more difficult to get reimbursed. With the changes coming in healthcare who knows if SaaS software is even a smart purchase now? If we go to one payor that would streamline your needs to file insurance to different clearing houses and there may be no need to bill a patient.

SaaS software might work for many physician’s but is your data really your data? How do you keep it from getting “mined” without your consent?

So you can most likely purchase a perpetual license from any vendor. My father always said “Paper will sit still and let you write anything on it”. Meaning read the contract and know what you are signing makes common sense. Just know that your in perpetuity use is only as good as that vendors balance sheet, your willingness to loosen your grip on your data if it’s SaaS, the financial viability of having your software hosted versus doing it yourself for less. But in the end make sure you are not buying a perpetual license of Wordstar.

I’ve learned over the years that there’s a LOT of misunderstanding among “purchasers” of software about what they really “own.” None of us “owns” Windows or OS X or certainly (nearly) any of the software that runs our industry. It’s leased/licensed. The problem is that folks don’t understand the difference between PAYING for the license and OWNING the software. Once they stop paying for it (even temporarily), they feel like they own it.

Over on one of the MGMA lists, I learned that a very large and well known vendor uses 10 year licenses by default (but apparently negotiating for a “perpetual” one is easy). I’ve been pondering the utility of this…a surprise bill 10 years later?

Thanks for the post, I may direct some potential clients here.