When to change from PAYG to Perpetual
Posted by Sinclair Hughes on 19 July 2018 09:54 AM
There is no hard and fast rule regarding when it is commercially beneficial for you to transfer your payments from the PAYG (Pay As You Go) option to the Perpetual option, which has a one-off license payment and then fixed, monthly payments for on-going support services & future software maintenance.

The best calculation model could be to use the Equivalent Annual Cost method.

Using the following fees, cost of capital, a nominal 'lifetime' and monthly fees of $200 


The Equivalent Annual Cost would be:


Use the EAC to compare with your PAYG charges (remember to allow for GST).

The 'Expected Lifetime' value is a bit of an anomaly as there is no future capital reinvestment required for the Perpetual license.
If you extend the Expected Lifetime out to 5 or 10 years the following EAC values are calculated:
    EAC at 5 years =   $3439
    EAC at 10 years = $2982