More than half of enterprise software vendors will be making changes to their licensing models in the next year, says IDC, driven by financial imperatives, industry dynamics and customer demands.

The shift will better enable customers to address their business needs and improve ROI, says IDC’s Amy Mizoras Konary. “The software market will move toward licensing models and practices that increase the predictability of vendor revenues, making it easier for customers to manage and comply with software licence contracts, and clearly establish the business value of software,” she says.

At present, 75% of software vendors receive revenue up front as part of their licensing models, according to The Future of Software Licensing Study carried out by IDC, which surveyed 100 US software vendors and 100 US software customers (of various sizes). But, according to the survey, 43% of software vendors and 26% of customers believe that by 2010 the majority of worldwide software revenues will be derived from subscription-based software offerings, forcing many vendors to make radical – and painful – changes to the licensing models they currently employ.

Another driver will be customers’ demand for more simple software contracts as their own business needs become more complex. IDC’s study found that medium and large-sized software customers are now dealing with an average of more than 40 software contracts – and 70% of these companies expect their contracts to become increasingly costly and complex to manage.