Prepaid software: More than a token solution to licensing woes

Software licensing's third way offers flexibility and savings -- not to mention a stronger bond between seller and buyer

I'm writing about Aspen Technology today not because you are likely to ever need its software (unless you own an oil refinery) but because the way the company allows its customers to purchase its smorgasbord of software applications is unique -- so much so that you may want to consider putting a little pressure on your vendors to consider the same.

As opposed to the traditional model, which includes a perpetual license, and the newer SaaS (software as a service) model, which is pay-as-you-go, Aspen Technology offers a third way to license software, one more akin to buying a prepaid cell phone card.

I don't want to expend too much ink talking about the company's software per se, but to frame how it works, you need to know a little about what Aspen Technology does.

The product suits the business model
Aspen Technology offers three suites of software, the first of which, its engineering software, is used by the likes of BP and Chevron to help design and build refineries. As Blair Wheeler, senior vice president at Aspen Technology, puts it, an oil refinery is really a giant chemical lab with miles of piping, heat exchangers, boilers, and cooling towers, all used to process crude.

The second suite, for plant manufacturing, monitors all the processes used to produce the finished product. The third set of applications is a supply-chain suite for optimizing the movement of materials into and out of the system.

Perhaps the idea for its business model was born of the fact that you need all of the software some of the time and some of the software all of the time, but you never need all of the software all of the time. (My apologies to Abe Lincoln.)

Prepaid token model
In response to its unique scenario, Aspen Technology sells tokens that the buyer uses to purchase any of its software in five- to six-year chunks. Once you have purchased tokens, you can use them to license any of the company's products. So if the engineering suite requires 50 tokens per user, and the plant manufacturing suite is worth 20 tokens per user, and the supply-chain software is worth, say, 10 tokens, you can divide that up in any combination you choose.

Let's say you start by purchasing 1,000 tokens, enough to have all three suites used by N number of people. You quickly discover that you need five fewer people on the engineering package but 20 more people on the supply-chain suite. Well, just shuffle your tokens around. Five fewer people on engineering frees up 250 tokens, which you can now put toward 20 more people on the supply-chain solution with 5 tokens left over.

Benefits of tokens
While simple in concept, say Bill Polk and Allison Smith, research directors at AMR Research, the model allows for fairly complex purchasing scenarios. In addition, companies have the flexibility to expense or capitalize the software acquisition.