Fog Creek Software
Discussion Board

Aren't you making Mistake Number 4, Joel?

Mistake number 4 describes the running out of upgrade revenue problem. It also seems to strongly advocate selling one year licenses for software. Yet both CityDesk and FogBugz are sold on a traditional model. Why is this, Joel? Why not sell one year licenses instead?

Mr Jack
Wednesday, October 30, 2002

I think Joel answers your question in the same passage where he "advocates" one-year site licenses:

"Once people got used to the idea that you 'own' the software that you bought, and you don't have to upgrade if you don't want the new features, that can be a big problem for the software company which is trying to sell a product that is already feature complete."

I don't think Joel's point is that software companies should always adopt a one-year-license scheme -- rather, his point is that they should adopt a one-year-license scheme whenever their customers can be persuaded to accept such a scheme.

Wednesday, October 30, 2002

The full quote.

The trouble is that with packaged software like Microsoft's, customers won't fall for it. Microsoft has been trying to get their customers to accept subscription-based software since the early 90's, and they get massive pushback from their customers every single time. Once people got used to the idea that you "own" the software that you bought, and you don't have to upgrade if you don't want the new features, that can be a big problem for the software company which is trying to sell a product that is already feature complete.

Wednesday, October 30, 2002

I took that as Joel saying that you can't change the way you do it after you've started doing it. Which I'd say is all the more reason to do it by subscription in the first place. Joel does site at least one company that does it the other way. And finally since he lists it as a mistake that rather implies he thinks it can be done better.

Mr Jack
Wednesday, October 30, 2002

Joel seems to me to be saying that the subscription-based model doesn't work with packaged software. I certainly wouldn't have bought CityDesk if it was sold by subscription, but I'm happy to pay for an upgrade every year as they add new features etc.

Companies like SAS can get away with it because their software is hugely expensive to start with, so it's not Ma and Pop making a purchase decision, it's the accountants. Accountants are used to the idea of leasing equipment rather than paying for it up front, so they see this sort of arrangement as a good deal.

Darren Collins
Wednesday, October 30, 2002

Darren's got it right.

I worry about this a lot, but I think the expectation has already been set that packaged software is a one-time license. Consumers aren't as good as accountants at translating prices between annual and one-time. We didn't create this mess but we have to live with it :)

Joel Spolsky
Wednesday, October 30, 2002

It really depends on your market. Most of the companies in my industry have an annual "support" fee which covers telephone and email support, as well as "remote" support using something like PC Anywhere or Citrix or whatever.

This is usually somewhere in the area of 15% to 20% of the total original cost of the software, per year, invoiced monthly, quarterly or annually. It provides a steady stream of revenue for the software supplier, and gives the users a sense of security, since they get all upgrades and so on included in this.

Having said this, it won't work for most off-the-shelf software, since it isn't usually business-critical. So what if Word doesn't work for half a day. But may J.R. Bob Dobbs help you if you can't print paycheques on payday!

Certain things are worth investing in on an annual basis for support and upgrades. CityDesk isn't one of them, as much as I love it. It just isn't worth 15% per year to me.

A Guy What Writes Software
Thursday, October 31, 2002

Microsoft's Subscription Trial in Australia for Microsoft Office has failed, and the trial has been cancelled. Everyone who purchased a subscription is being given a full license to the software.

Thursday, October 31, 2002

I wouldn't put CityDesk and FogBugz in the same bag. FogBugz might be the kind of mission critical software where users might accept subscribtions.

This is the kind of software that must be up 24/7 (OK. Down to 8/5 according to the companies). If you have a problem, you can't just go and install the program on your neighbour's computer. Neither can you wait until next week for the problem to be solved.

Serge Wautier
Thursday, October 31, 2002

Still, you would still need a "regular" model for the people who do not have such needs that a maintenance contract is justified.
In fact, many industries do just that. Sell the product, then sell a maintenance contract for those who need it, and provide maintenance on demand to people who can't justify a contract.
Of course this only works well if the original product works well enough that maintenance is only an issue under special circumstances. Such as wear and tear for physical products, or accidents.
Software does not have such physical properties. Hence, when the software itself is of acceptable quality, you don't so much need a maintenance contract for the software, as for the system you have of which the software is a part. Because the only friction you have with software (besides internal friction, or bugs) is between it and the system (operating system plus other applications).

Actually, under those circumstances I can't think of a good reason for a software subscription.

Thursday, October 31, 2002

This thread on Slashdot has incredibly good discussion on when one would lease.  It's really about hardware than software, but the principles apply.

Clearly, if you're a business that values cash highly because you're just starting out, leases are useful.  Down the road, it depends on the specifics of your situation.

Sunday, November 03, 2002


Joel Spolsky
Tuesday, November 05, 2002

Testing what, Joel?

Friday, November 08, 2002

*  Recent Topics

*  Fog Creek Home