Modern ERP software is light years away from the limitations of the one-time purchasing model from the past, but not all vendors use the same pricing structure. Whether you’re a first-timer or a seasoned pro, understanding the different licensing models is crucial for charting your business’s course to efficiency and profitability.
Below are the pros, cons, and top use cases for each of the ERP system pricing models to help you decide which is best for your business and budget.
Perpetual licensing
Perpetual licenses are as close to a traditional purchase as you will find. But like DVDs, this pricing model is becoming a relic of the past, although some vendors still use it. This licensing model includes a one-time, upfront payment. But here's the catch. Every year, there are fees for maintenance and support, and if you want access to new features, that’ll cost you extra. This model works for businesses that don’t want to upgrade too often or prefer to keep things as they are—cruising steadily with no sudden course changes.
Pros:
- Single large payment: With perpetual licensing, you pay one big upfront cost, and your ongoing costs are smaller and more manageable. Some CFOs love this model because it’s easier to plan for it in future budgets.
- Systems on autopilot: If you're happy with the current state of your software and don’t need regular upgrades, perpetual licensing can let you coast. Just stick to what works and avoid those update notifications.
- On-prem control: If you want your software on-premises or hosted, this licensing model keeps everything close to home.
Cons:
- Pay for what’s not coming: Here’s the rub—you will likely still pay for support, but over time, upgrades and new features won’t be covered. This licensing model is fading in popularity, and that can mean your software is closing in on end-of-life. Unless you are okay with maintenance fees chipping away at your budget, it might be time to look elsewhere.
- Stuck in time: Businesses opting out of updates can be left using systems that feel like outdated tech. Your business could be left behind while the competition zooms ahead in a flashier model.
Best for:
Perpetual licensing can be the right choice for companies that want on-premises systems and don’t need the latest bells and whistles. If you prefer stability and aren’t concerned with constant upgrades, this might be the right option.
Subscription-based licensing
Think of this licensing model like your favorite streaming service—you’re always using the latest software version without paying extra for each upgrade. Subscription-based licensing has the agility needed for today's and tomorrow's ERP software needs. You pay based on what you need or use, and when new capabilities are released, upgrades are easily available. There are a few different ways to handle subscription-based licensing, so let’s break it down.
User-based licensing
User-based licensing is straightforward. Access costs are based on the number of users. There are two types:
- Named users: Access is limited to specific individuals only.
- Concurrent users: The number of people who can log in and use the system at the same time is limited.
Pros:
- Easy to scale: Need to add more crew members? No problem; just buy more licenses as your team expands.
Cons:
- Stuck with stragglers: User-based licensing can be limiting if your team changes or grows seasonally. You’re locked into paying for users even when they’re not needed until your next contract renewal, which can create inefficiencies and budget concerns.
- Budget picks the path: Collaboration and decision-making can take a hit when your budget determines who gets access.
Best for:
Small companies or startups that aren’t focused on growth might find user-based licensing a good fit. This model is easy to manage if your business isn’t subject to big staffing fluctuations.
Consumption-based licensing
In the subscription model universe, consumption-based licensing is the star. Instead of paying by user count, you pay for pay for the resources your business consumes. Stellar One uses this model because it makes the most sense for growing companies.
Pros:
- Predictable pricing: If your business has seasonal spikes (think holiday shopping or back-to-school sales), this model makes sure you’re not paying for peak usage all year round. It’s like having extra fuel when you need it but not paying extra when you’re using cruise control.
- Flexible growth: As your company grows, your ERP resources grow with you. Scaling up is easy and fast.
Cons:
- Overcommitment: Choosing a pricing level that doesn’t quite fit is possible. Overestimating your needs could mean you end up paying more than you should.
- Pricing perplexity: Some vendors use more than four dozen volume points in their pricing structure, so it’s not always easy to figure out which pricing level fits your needs. Psst…Stellar One and Acumatica keep it simple!
Best for:
This model is perfect for companies aiming for the stars—those that want to scale fast, improve efficiency, and easily handle fluctuating demand. This is your best bet if rapid deployment and flexibility are mission-critical for your team.
Perpetual vs. subscription licensing
Here’s a TL;DR look at the differences between perpetual ERP licensing and subscription ERP licensing: 
Navigating ERP platform licensing
When it comes to picking your ERP software licensing model, the choice depends on your business’s needs. No matter what path you choose, the goal is the same: streamline your operations, cut down on unnecessary costs, and get your ERP system working for you, not against you.
Ready to explore new business horizons? Stellar One’s consumption-based pricing gives you the ultimate in predictability and control, and our Risk-Free Trial helps move your business to the next level fast.