Its hard to compare apples with apples…
…when you don’t consider how much some really cost!
Subscription Or Ownership, Which Is More Cost-Effective In Veterinary Practices?
Owning business software costs money and recent trends in subscription licensing are often hailed as a means of helping manage that cost.
Fifteen years ago, the perpetual licence model was the only way you could buy business software licences. A perpetual licence is the ‘traditional’ model used to purchase software. You pay for your software licence up-front and have the right to use it indefinitely. On top of the licence fee, you will have the option to pay for one-off implementation services, or add a support contract, which is renewed annually.
Today, subscription models are becoming more prevalent and, according to Gartner, by 2020 will account for over 80 per cent of licence offerings. With a subscription licensing model you pay a per user fee, either monthly or annually, which allows you to use the software during the subscription term. The key difference being you don’t own the software, instead you lease it. The subscription payment includes your software licences, access to support services and new versions of the software as they are released.
Subscription software is being hailed as a more cost effective way to use software. According to Microsoft, “the benefits of the subscription model are huge. Subscribers are always up-to-date. They get the latest and most complete applications and can use subscriptions across the multitude of devices” – all with minimal upfront risk and minimum capital investment.
But is this true in veterinary software?
In this analysis we’ll look at veterinary software from three different vendors and compare their ownership costs over time. We’ll use a fifteen year time scale and ignore hardware costs as each individual business will be different.
There are key considerations driving marketing about subscription software use and some of the more serious ones are listed below.
Although perpetual licences may be used forever, they have a short lifecycle and within few years eventually become obsolete, due to factors such as supported hardware and companion software. As a result you may need to upgrade periodically to ensure compatibility with other line-of-business applications. In this comparison, we will consider a five year obsolescence cycle, requiring software upgrades every five years.
With a subscription model, upgrades and new features are released in real time and rolled into the monthly price, ensuring no compatibility or obsolescence issues.
Remember, the hardware that runs these applications is not considered in the analysis as costs can vary too widely to be realistically modelled.
With perpetual licences, if you add new staff members you need to buy licences outright – but if a staff member leaves you are stuck with those licences.
The subscription model can make licence management simpler. It provides a degree of flexibility because you only pay for what you use, adding and scaling back licences inline with demand.
With perpetual licences you pay for software upfront and support contracts annually. For larger software deployments the upfront cost can be significant.
In comparison, a subscription model claims to offer better affordability with a predictable payment schedule, becoming a part of operational expenditure.
The end result of our comparison should give a good indication of how well this works over time, and in the cost differences between the three vendors.
The comparison timeframe has been set at fifteen years, as there may be significant changes in computing beyond that time.
Three usage models have been built, based on different sizes of practice. The models are a three user, five user and ten user.
Costs have been taken from vendor’s websites, where available.
CHSVet Plus (VPMS1)
CHSVet Plus costs $1495 to purchase outright (perpetual license) and typically requires 5 hours of support per year across the practice as a whole. Support is billed at $140/hr
Upgrading CHSVet costs around $1250 and we’ll be assuming that it is required every five years as a minimum.
Pathology integration is required at setup and costs $700.
Installation and data conversion costs may apply, depending on the practice.
Monthly Fee Based Option (VPMS2)
VPMS2 is offered on a subscription basis at $250 for between 2 – 9 users per month. This price-point is used for both the three-user and five-user comparisons.
At the next comparison size (10 user) the price for VPMS2 is $450 for between 10 – 19 users per month.
VPMS2 also has a $2500 base installation cost.
No pricing was available concerning support or pathology integration.
Yearly Fee Per Terminal Option (VPMS3)
VPMS3 is offered at a flat rate of $1500 per terminal, per year.
No pricing was available for support, installation or pathology integration costs.
VPMS3 also needs Windows Server, RDP accounts and Microsoft office attached, adding to the operational cost.
Three Terminal Practice
For a small Vet practice, the results are sobering.
Were the practice to purchase a perpetual license on a three year asset amortisation cycle, CHSVet (VPMS1) would still be cheaper overall.
Factor into consideration the more turbulent nature of cashflow in a small practice, and the recurrent expense of software looks problematic. Cashflow in a small practice can be erratic and the subscription fee charged by the vendor is a single periodic payment.
Consider the consequences of a large annual subscription, in a cashflow crisis that cannot provide for it. What happens to the practice if your subscription VPMS stops working?
- At the five year point (2023), CHSVet is $13,865 cheaper than VPMS3, and $7,365 cheaper than VPMS2.
- At the ten year point (2028), CHSVet is $29,115 cheaper than VPMS3, and $15,115 cheaper than VPMS2.
- At the 15 year point (2033), CHSVet is $51,392 cheaper than VPMS3, and $44,365 cheaper than VPMS2.
For a medium sized Vet practice, the differences between the vendors pricing models diverge.
They diverge so much that a meaningful comparison of all three together becomes difficult. To address this divergence, we’ll compare the remaining data on a vendor-to-vendor basis.
CHSVet vs VPMS3
Five Terminal Practice
VPMS3’s flat rate was already making an impact at the small practice level, however it becomes overwhelming as the number of terminals grows.
- At the five year point (2023), CHSVet is $32,630 cheaper than VPMS3.
- At the ten year point (2028), CHSVet is $66,630 cheaper than VPMS3.
- At the 15 year point (2033), CHSVet is $100,630 cheaper than VPMS3.
Most telling of all, CHSVet is $25 cheaper than VPMS3, at the installation stage in year one!
Ten Terminal Practice
For a large Vet practice of ten terminals, the differences between the vendors pricing models are stark.
VPMS3 flat-rate subscription is almost four times the cost of CHSVet.
- At the five year point (2023), CHSVet is $57,650 cheaper than VPMS3.
- At the ten year point (2028), CHSVet is $116,650 cheaper than VPMS3.
- At the 15 year point (2033), CHSVet is $175,650 cheaper than VPMS3.
With this big a difference in price, it’s nearly impossible to see value in a product that is almost four times the cost of it’s competitor.
CHSVet vs VPMS2
Five Terminal Practice
While the comparison between these two vendors is more reasonable, the “lower cost” promise of subscription software still isn’t being realised.
- At the five year point (2023), CHSVet is $1,875 cheaper than VPMS2.
- At the ten year point (2028), CHSVet is $7,125 cheaper than VPMS2.
- At the 15 year point (2033), CHSVet is $12,375 cheaper than VPMS2.
It should be noted that while VPMS2 is cheaper on day one, that advantage disappears after the first year, where CHSVet costs around $700 while VPMS2 bills the practice $3,000.
Importantly, CHSVet makes very little impact on the practice’s cash-flow in the intervening years between upgrades.
Ten Terminal Practice
For a large Vet practice, the differences between the vendors pricing models make the case.
VPMS3 flat-rate subscription is almost four times the cost of CHSVet and just under three times that of VPMS2.
- At the five year point (2023), CHSVet is $2,550 cheaper than VPMS2.
- At the ten year point (2028), CHSVet is $13,550 cheaper than VPMS2.
- At the 15 year point (2033), CHSVet is $24,550 cheaper than VPMS2.
It should be noted that while VPMS2 is significantly cheaper on day one, that advantage is gone by the second year.
CHSVet’s impact on the practice’s cash-flow in the intervening years between upgrades is virtually negligible (~$700) compared to VPMS2’s $5,400 annual subscription.
Some Very Important Points
The first thing that needs to be stated her is the impact of each model on cashflow.
The five year points were selected as they represent the most expensive points in the comparison, thus making the comparison fairer on the more expensive vendors.
In years when CHSVet is not being updated, the differences between the models are profound.
In non-update years, the cost of CHSVet is an average of five support hours per practice, around $700.
In the same time frame, VPMS2 costs $3,000/yr in a small practice, and $3,000/yr in a medium practice. In a large practice it costs $6900/yr.
VPMS3 costs $4,500/yr for a small practice, $9,000/yr in a medium practice and $15,000 in a large practice.
With a perpetual license, you own access to the software forever. If a problem arises, support may cost, but unless the issue is critical the software still functions.
While maintenance costs can vary year-on-year, subscription costs are recurrent and must be paid to keep the software available.
- What happens if you have a cashflow issue and cannot maintain your subscription?
- What happens if the software vendor goes out of business?
- What happens if the software vendor gets purchased by a bigger competitor, with a more expensive pricing model?
- What happens to your practice data? Can you get access to it? How do you serve your clients?
Is A Subscription Product Worth The Extra Cost?
Subscription software makes great sense in business environments or endeavours where the technology, or the business, is evolving rapidly.
Veterinary Practice Management Software has been available for many years now and is relatively mature.
Many additional services, like eftpos (Tyro) and Retention Marketing (gCast) have been added to existing CHSVet installations with little cost or effort. This demonstrates that outright ownership of CHSVet is not necessarily a barrier to the adoption of new technologies or services.
Please consider these points, as well as the cost analysis, when deciding if subscription software is right for your practice.
All estimates based on publicly available information and based on current publicly advertised pricing and specifications. Specifications and pricing may change without notice and additional discounts or costs may apply. You should check directly with each company prior to finalising any agreement based on this general price comparison. EOE.