Business Operations-Fall 2024

Know the Pros and Cons of Construction Software Pricing Plans

By Michael Stromberg

Michael Stromberg is a lead data analyst and the head of software for Construction Coverage. His background is in software engineering and mechanical engineering. Construction Coverage specializes in researching construction software, insurance, and related services. Learn more at www.constructioncoverage.com.

When it comes time to choose a construction management software or accounting tool for your business, besides comparing features, you will also need to understanding pricing structures.

Different construction software products offer different pricing models, and each pricing model has different factors that will impact the total cost to your business. Some software products are subscription based, while others offer a perpetual license. There are also free versions of some construction software programs (usually with more limited features), as well as open-source options. To complicate things more, exact pricing information can sometimes be difficult to find on vendor websites.

Option #1: Perpetual License

A perpetual software license is a type of software pricing model that allows you to purchase the program once and use it forever. While the software itself can be used indefinitely, any upgrades, updates, or support usually must be purchased separately.

Perpetual licenses are commonly found in on-premise deployments (or installations) where the customer pays for a license to use the software on their local servers or desktop computers. Before the advent of cloud-based software, this was the most common type of software pricing model. Today, however, perpetual licenses for construction software are increasingly rare, as most construction software companies have moved toward subscription-based pricing models.

Factors Affecting the Licensing Price

When paying a one-time fee for a perpetual license, the primary factor affecting cost will be which software features are included with the license. A given software provider will likely have multiple license tiers or modules available for purchase. Lower-level tiers will provide

basic features, while upper-level tiers will provide more advanced features in addition to the basic features offered through lower-level licenses.

With construction project management software, for example, the lowest level license might offer basic project management features or project tracking features only; whereas, the highest level license would also provide advanced features covering preconstruction, accounting, and analytics.

The other factor affecting cost is how many licenses are needed. For example, a customer may have the option to purchase additional licenses for use by employees or contractors in their organization. The exact cost of these additional licenses will depend on the software vendor and the specific licensing terms associated with their product. In some cases, an unlimited number of users may be able to access the product under a single license. In other cases, each user may need their own individual license.

Additional & Hidden Costs of Perpetual Licenses

It is also essential that customers understand the hardware requirements and any ongoing support or renewal fees associated with their perpetual license agreement.

One of the largest costs associated with a one-time software license (outside of the license itself) is supplying and maintaining the necessary hardware to support the software. If the customer is responsible for maintaining the hardware—as opposed to a cloud-based solution where the vendor maintains it—they will need to account for any hardware purchases, upgrades, or repairs that may be necessary to existing systems. This could mean purchasing new computers for employees, upgrading servers and other existing infrastructure, or setting up a new system from scratch. Businesses that go this route will need to set aside an appropriate amount of IT budget for these tasks.

Outside of the hardware costs, some vendors will also require customers to pay annual maintenance fees to receive updates, technical support, and other services related to their purchased software package. This

is especially important for products like estimating software where the cost of building materials can change dramatically over time. Additionally, if your firm needs to customize the software in any way or integrate it with other systems, this will also cost more.

Customers need to factor these fees into their overall software budget when attempting to calculate a realistic estimate of the total cost of using a particular construction software product over time.

A perpetual software license for construction software can be a cost-effective option for companies that use the software frequently, need it for an extended period, and don’t need ongoing updates. While the upfront costs associated with a perpetual software license are usually high, in the long run, they can be a more economical solution when

compared to subscription-based options in certain scenarios.

Option #2: Subscription License

While historically, on-premise deployments with perpetual software licenses were the norm, software-as-a-service (SaaS) subscription models have become increasingly popular in the construction industry. This shift has allowed companies to access higher quality and more feature-rich products, while also providing a predictable monthly cost that can be budgeted for more easily over time. While construction professionals will still be able to find some products on the market delivered via a perpetual license, most new software vendors have fully embraced the subscription model.

A subscription pricing model for

construction software means that you pay an annual or monthly subscription fee to use the software. You need to keep paying the fee in order to keep using the software, but in exchange, you have immediate access to updates and many new features as they are released. You also don’t need to maintain the hardware that the software is hosted on. Instead, subscription software is typically accessed via a web browser or through an app on mobile devices.

This pricing model is more flexible and often more affordable than a comparable perpetual license that also has access to regular feature updates and support. It also allows users to only pay for the features they need and scale up or down as needed more conveniently. For these reasons, subscription models are especially popular among

construction professionals in small and medium businesses who would have trouble affording the upfront costs associated with a perpetual license and whose business needs are likely to change more significantly over time.

Factors Affecting Subscription Price

The main factors affecting the price of a subscription license are similar to those mentioned above for a perpetual license—namely, the number of software features included, the number of users who will regularly access the software, and the level of support services provided.

Similar to software providers that offer a perpetual license, those that offer a software subscription will usually have various tiers, modules, or integrations that can be purchased. Lower-level subscriptions will provide more limited features while upper-level ones will come with more advanced functionalities. The same is true for integrations: entry-level subscriptions might offer fewer integrations than the more expensive subscription options. Whereas with a perpetual license, the software vendor may allow you to only purchase

a single license for your entire team to use, with subscriptions you will typically have to pay more based on how many people on your team have access to the software. Another variation on this is commonly seen in construction project management software pricing models where they will charge based on the volume of business run through the software. For example, Procore, which offers one of the most popular construction management tools on the market, will charge construction companies based on a percentage of their revenue.

Additional & Hidden Costs of Subscriptions

When compared to perpetual licenses, subscription software as a service tends to come with fewer hidden costs. For example, there are no additional costs associated with upgrading the software or dealing with hardware maintenance.

However, some subscription services may require users to purchase additional modules or integrations to access certain features that are released at a later date. Additionally, many vendors will have limits on how much

data you can store or process without paying an extra fee. As a result, it’s important for companies considering a subscription-based construction software package to familiarize themselves with the details of their particular contract before signing up and make sure that they understand all of the potential hidden costs that come along with using the service.

Option 3: Open-Source Software

With open-source software, you get access to free tools and programs that can be modified to meet your specific needs. Two examples of open-source construction software are FreeCAD (3D modeling software) and OpenProject (construction management software). When it comes to using open-source software in the construction industry, there are both advantages and disadvantages to consider. On one hand, open-source software is typically free to use and distribute, which can save construction companies money. Additionally, open-source software can be modified to suit a company’s specific needs and requirements and has a transparent development process that allows users to see the source code and understand how the software works. However, open-source software may not have the same level of commercial support, features, and capabilities as proprietary software. Furthermore, open-source software may require ongoing maintenance and updates which can be time-consuming and costly. Additionally, integrating open-source software with other systems or software may incur additional costs, and customization may require additional investment as well. •