Also known as SaaS.

This blanket term describes software which isn’t purchased outright by users, but instead licensed on a monthly or other periodic basis. Generally, the licensor is the software vendor (creator and owner of the intellectual property) but not always. For example, a distributor or reseller can license the software as a service to the user, typically acting as an agent between the user and the vendor, and taking a percentage of the periodic fee.

Software as a Service, or SaaS, has advantages including lower distribution costs, lower initial purchase price, more frequent updates, greater flexibility, and a shift from (high) capital expenditure to (regular) operational expenditure, the latter of which also has tax advantages. Disadvantages include the potential for vendor lock in, and a recurring cost which can in due course result in a higher overall cost of ownership.