Capex or Opex? How Software Licensing Choices Land in Your Accounts

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IT and finance are usually having two different arguments under one heading: control and continuity on one side, which year the cost lands in on the other. The technical difference is what you own and what you can transfer. The accounting treatment is your accountant’s call under your reporting framework, and no licensing article can make it for you.

1. Buy perpetual if a machine must keep working when nobody is paying. Office LTSC 2024 Professional Plus is the current perpetual route through volume licensing.
2. Run the amortisation over the remaining supported life, not a round five years. Office LTSC 2024 reaches end of support on 10 October 2029, so a licence bought today is written down over what is left.
3. Skip perpetual if headcount moves in either direction. A perpetual licence bought for someone who has left is stranded permanently; a subscription seat can be reassigned for the remaining term.
4. Buy perpetual if grant or capital-allowance funding is tied to acquiring an asset. Read the funding terms before the licensing terms.
5. Count what only one side includes before comparing anything: mailboxes and the platform behind them, cloud storage, device management, endpoint protection and mail filtering.
6. Confirm the treatment with whoever signs your accounts. Take the shape of the argument from here and the classification from them.

If the answer is already obvious for your estate, stop here. Below is what each purchase actually leaves you holding, the five-step sum that ends most of these arguments, and the case for a deliberately split estate.

Why it happens

A perpetual licence buys indefinite use rights to a specific version. A subscription buys access for as long as you pay. Those are different purchases before anybody opens a spreadsheet, and the differences that survive into the accounts are ownership, transferability, and what happens on the day the money stops.

Ownership is the easy one. Stop paying for Office LTSC 2024 and nothing happens: you keep running the version you bought, until Microsoft’s published support date of 10 October 2029 passes and the security updates stop. Stop paying a Microsoft 365 subscription and the service moves through stages. Microsoft publishes them: about 30 days where users keep working, then about 90 days where administrators can retrieve data but users cannot, then deprovisioning and deletion, with remaining data deleted no later than 180 days after cancellation. Multi-year Volume Licensing terms run longer at the front, 90 days rather than 30. It is not instant, and it is not indefinite either.

Transferability is the difference finance teams rarely hear and usually find interesting. Microsoft permits the transfer of fully-paid, perpetual licences to an Affiliate, or to a third party solely in connection with the transfer of the hardware or employees they were assigned to, as part of a divestiture or merger, with notice to Microsoft and documentation to the transferee. Subscription licences cannot be transferred to a third party at all. If the business is being prepared for sale or is likely to divest a division, that is a real distinction between the two purchases and not a theoretical one.

What does not differ is the money leaving the business. Capitalising a purchase changes when the cost appears and which budget approves it. It can matter a great deal for approval routes, for covenants and for reported profit in a particular year. It is not a saving, and presenting it as one is how these arguments become circular.

The third thing that costs money on the perpetual side is Software Assurance, and it is worth naming because it is the only renewal date a perpetual estate has. Microsoft is explicit that Software Assurance benefits end when the coverage ends – including the Windows Server disaster recovery rights that a standby server may be relying on. Letting it lapse is a legitimate decision. Letting it lapse without knowing what it was carrying is not.

Full reference

What each purchase leaves you holding

The arithmetic that ends most of these arguments

1. Decide the honest life. Use the published lifecycle date rather than optimism: for Office LTSC 2024 that is 10 October 2029, and what counts is the time remaining from your purchase date, not the full five years.
2. Divide the perpetual purchase by the number of years remaining to get a comparable annual figure.
3. Add what you would buy separately alongside it: mailboxes and the platform behind them, cloud storage, device management, endpoint protection, mail filtering, and the staff time spent on keys, media and reactivations.
4. Compare against the subscription cost multiplied by the seats you will actually assign, not the seats you would purchase.
5. Then price the option you are buying or giving up: the ability to stop paying in a bad year, against the obligation to keep paying in a good one.

Presented that way the disagreement usually dissolves, because both sides are finally looking at the same number. Where it does not, the remaining difference is genuinely risk appetite rather than arithmetic, and that is a decision for whoever owns the risk. Do the sum on the quote in front of you rather than on a remembered ratio; the answer moves with the mix of services, not with a rule of thumb.

Framing it so both sides get what they need

Finance needs a total over the honest life with the bundled components itemised, so that a subscription is not compared against a perpetual licence while quietly ignoring the mail platform, the storage and the security tooling only one of them includes. That is the single most common way these comparisons go wrong, and it goes wrong in the same direction every time.

IT needs an answer to a different question: what happens to specific machines in a year when payments are deferred. If the answer is unacceptable for a particular group – machine control, an air-gapped line, a regulated process – license those perpetually and subscribe for everybody else. A split estate is a legitimate outcome rather than a failure to decide, provided the register records which machines are which and who is responsible for each.

Which way to lean, by situation

• Stable headcount, long-lived machines, capital budget available: perpetual is defensible, and a long-term servicing release exists for exactly this case.
• Headcount moving in either direction: subscription. Perpetual licences bought for departed staff are stranded permanently, while a subscription seat can be reassigned for the remaining term.
• Air-gapped, regulated or machine-control PCs: perpetual, and specifically a version designed to sit still without feature changes.
• You already pay separately for mail, storage, device management and antivirus: subscription, because you are buying those things twice.
• A business being prepared for sale or a divestiture: involve the accountant early, and note that only fully-paid perpetual licences can travel with a divested division at all.
• Grant or capital allowance funding tied to assets: perpetual may be the only thing that qualifies. Read the funding terms before the licensing terms.

Questions people ask about this