With the rise of cloud computing, software licensing began to change mostly due to the very nature of working online and to drive adoption of products on a daily basis. While the seat license model is slowly transition (mostly due to volume discounts), many companies are actively moving towards Cloud licensing to capture new market share.

Thanks to the Cloud, customers began to expect the ability to pay month-to-month and cancel at any time if they were not happy with their experience. These expectations led to the recurring types of licensing models.
Month-to-month and annual subscription licenses are standard fare in the Cloud. Paying these regular fees enables you to use the software or service for the next month or year respectively.

Paying month-to-month give your small business the flexibility it needs to change vendors or stop using the Cloud for a particular service altogether. This is a significant advantage over the older types of licenses where you paid a higher one-time fee up front.

That said, paying for an annual license can lead to significant cost saving as many vendors heavily discount the price-per-month if you do so.

Many vendors allow you to start with a month-by-month license and then move to a pro-rated annual license if you decide to do so.

While cloud licensing may seem confusing at first, it helps if you break it down into the types of licenses discussed above. That way, you can weigh the pros and cons of each option more clearly.