The Benefits of Choosing Performance-Based Software Licensing for Your Business

In his latest article penned for the Forbes Business Council, Suren Avunjian (LigoLab CEO and Cofounder) builds a strong case for why enterprises should actively seek out technology companies that go beyond the norm and can help them achieve substantial and measurable results. 

Instead of accepting the status quo, he suggests that enterprises should demand a more balanced partnership from technology companies, and he takes aim at the traditional per-seat software license model to make his point.

Click on the link below to access Avunjian’s latest article in its entirety.

Is Per-Seat Licensing Sabotaging Your Software's Potential?

For a summarized version of the article, we invite you to continue reading.

Per-Seat vs. Performance-Based Software Licensing

First, let’s start with a quick explainer of the two models that Avunjian compares in the article.

Per-Seat Licensing: The business is charged a fixed fee for each user that accesses the software.

Performance-Based Licensing: The business is charged based on its use of the software.

Avunjian strongly believes that it’s essential for enterprises to switch from per-seat to performance-based licensing if they are to add automation to workflow and successfully manage staffing challenges and rising wages. 

Why Software Companies Continue to Push Per-Seat Licensing 

Avunjian says most software companies are more than happy to continue offering the per-seat model because it’s an uncomplicated and predictable revenue generator for them. They benefit financially every time a customer needs to add a seat, regardless of the customer’s intended amount of usage.

But in this case, what’s good for the software companies isn’t good for their customers thanks to misaligned incentives, cost inefficiency, limited scalability/flexibility, high upfront costs, and lower service quality. Avunjian does a great job of highlighting all of these business negatives associated with the per-seat license arrangement.

Why the Performance-Based Model is Better for Enterprises 

Next Avunjian breaks down the performance-based software license model by focusing on alignment, cost, innovation, and flexibility, but this time from the businesses’ perspective. Highlights from this breakdown are listed below.

Alignment: Since costs are tied to results, software companies are incentivized to focus on developing features that directly contribute to the success of their customers. 

Cost: Pricing is based on performance rather than pricing structures that favor the provider.

Innovation: Shifting the focus from revenue to innovation encourages providers to maximize automation and limit the need for human input. 

Flexibility: A performance-based software license offers the flexibility to adjust usage (and costs) to reflect actual business performance and needs. 

The Importance of Partnership

Avunjian welcomes the ongoing shift toward performance-based software licensing and expects this shift to continue and even accelerate thanks to aligned business-provider relationships built on partnership and delivery of more value through innovation and automation. 

“Paying for a per-seat software license rather than a performance-based license mostly leads to a sacrifice in other areas, namely business efficiency and cost-saving automation.”

Suren Avunjian, LigoLab CEO

Avunjian rounds out the article by providing another example that shows why the performance-based software arrangement is better for enterprises. He says buying software is like buying a house with the performance-based model representing the foundation needed to turn that house into a hotel.

“Your business might only need a house today, but choosing and using the right software licensing model can allow it to grow and evolve to a point where a hotel is required. With the performance-based model, the software company is the one that invests in the build-out of the hotel, and your business is only charged based on the number of people checked into the hotel.”

Suren Avunjian, LigoLab CEO

He closes the Forbes article by writing that enterprises adopting the performance-based model will benefit from fewer financial and operational barriers and become more competitive, agile, and cost-efficient.  

“Per-seat pricing is dead; long live value-based pricing!”

Suren Avunjian, LigoLab CEO

About the Author

Avunjian has served as LigoLab’s CEO, overseeing all business growth and operations, for nearly two decades. In addition to regularly contributing thought-leadership pieces that have made him a leading voice in the software and lab industries, he tirelessly supports a team of best-in-class personnel specializing in developing advanced laboratory information systems (LIS systems) for medical laboratories nationwide.

To learn about LigoLab and how the LIS company became an industry leader click the link below. 

Navigating the Future of Pathology: The LigoLab Advantage

Also listed are some of Avunjian’s prior contributions to the Forbes Business Council. 

The Costs Associated With Not Upgrading To Modern Software Systems

How To Choose The Best Software Strategy For Your Business

Enhancing Patient Care With Electronic Health Records And Laboratory Information Systems

Reducing Medical Waste And Cost With Just-In-Time Testing

The Impact Of Current Technology On The Future Of Medical Laboratories

Funding Versus Bootstrapping For An Enterprise Software Company