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A case for subscription software

There's a lot of talk (mostly on Microsoft) about why subscription licenses don't work. I think it's because subscriptions are only seen as good for the company, and not the customer.

But what if the software actually cost less for the end user? What if they got more with a subscription? Let's say you could pay $500 today for a classic software license and $250 for an upgrade every two years. Or, you could pay $100 for the software every year.

After five years, the classic model would cost the user $1000 dollars, and the subscription model would cost only $500. That's a good savings for the user. Does that mean the software company has lost $500 per use?

Probably not. In fact, the company might be able to make more money. You'd need twice as many users with the subscription model than with the classic model. But the entry price is only one fifth of the classic model. It depends if your market is price-sensitive, but such a big difference in price could attract many more than twice as many customers. That could generate more revenue than the classic model.

It's just a matter of convincing the end user that the subscription model is good for them. You could do that by giving subscription customers:
- any version they want to use with their subscription. They can upgrade to the latest version, or not. It's their choice.
- unlimited support.
- access to resources they can't get with the classic model (user forums, special previews, tutorials, etc.)

If customers were offered both model and explained the value, I think they'd choose the subscription model.

Jeremy
Friday, November 01, 2002

The big problem with software subscriptions is this:

I buy a subscription to MS Word for $100 for a year. I start typing my PhD thesis into it.

12 months later, I don't renew the subscription.

Now, how do I edit my thesis? That data has been effectively lost, because the only way I can access my Word docs is to have a working copy of MS word, which I don't have because the subscription timed out.

Unless the data is totally open, subscriptions will never work because of this data lockin. At that point subscriptions become extortion - "You pay us or all your data goes bye bye!"

Chris Tavares
Friday, November 01, 2002

But isn't that true as soon as you buy a proprietary product like MS Word? Once you build up a collection of documents, switching to another product (regarless of the license) is an issue.

As for the renewal process, I think of it a lot like moving into an apartment. I'm not buying a condo and paying full price, but instead I'm paying a monthly fee to use the space. As soon as a I stop paying rent, I don't have the right to be in that space. I would have to move, and that could be a hassle. However, I don't need to have a lot of money initially. Does that make renting an apartment extortion?

Jeremy
Friday, November 01, 2002

In my business we have both a monthly subscription product (web-based) and a Windows based straight-sale product.  I've spoken with a lot of customers about subscription charges (monthly, quarterly, yearly, etc.) and about how they like to pay for software and I've yet to speak with anyone who likes subscriptions. 

By far, the largest group of our customers is comprised of people who want to buy software, get a CD, and call me only if they need me.  Even if they are quite likely to buy an upgrade, simply having the choice to say yes or no depending on the features being offered is critical.

The people who do buy into the web product never do it in order to gain the low monthly cost.  They do it because they need access to the web for their users (our software provides medical and fitness-related screening).

My sense is that people simply don't like having another monthly bill.  They would rather pay the money (our systems cost upward of $3K) and *have* it, then worry about the day when they can no longer access their software - even if they have to pay more up front.

Mark Brittingham
Friday, November 01, 2002

>>> But isn't that true as soon as you buy a proprietary product like MS Word? Once you build up a collection of documents, switching to another product (regarless of the license) is an issue. <<<

There's a big difference, though. When I buy a regular license for MS Word, it works forever. If I buy a subscription, it STOPS WORKING when the subscription runs out.

MS wants subscriptions so that that can continue to soak people for money without actually offering new features. They're pretty much run out of things to add to MS Office, and they can't charge for strictly bug fixes.

Chris Tavares
Friday, November 01, 2002

The biggest problem with subscription software is it's not free.

http://www.linuxjournal.com/article.php?sid=6414

Dan Sickles
Friday, November 01, 2002

Comparing subscription software to renting an apartment obviously doesn't address the concern raised by not being able to get to your data.

The only way the comparison makes sense is if you are not allowed to move your furniture out of the apartment and if you don't pay your rent you lose your furniture too.

Chris
Friday, November 01, 2002

Losing access to your files is a serious issue. By subscribing, this becomes a higher risk in two other ways also:

1. The company goes out of business. Your subscription expires. Your data is gone. Note that in these sorts of scenarios it is not unheard of for the out-out-business announcement to come suddenly and unexpectedly since they don't want to cause a panic among their customers until it's too late.

2. Wow you saved a few dollars by subscribing instead of buying. Oops think again -- the next year your subscription is being raised from $100 to $25,000/year. Take it or leave it, buddy! There's no guarantee that the subscription rates won't go up endlessly once they have you by the balls. Cable TV, anyone?

--

On a related subject, I no longer buy anything with disk-based or dongle based copy-protection unless there is absolutely no other choice. Three times now I have lost valuable data representing years of effort because the dongle burns out and the software is no longer supported or the company has gone under. It doesn't matter how much better the software is than its competitors -- losing all my data is too big a risk. I've learned that the hard way.

X. J. Scott
Friday, November 01, 2002

"Comparing subscription software to renting an apartment obviously doesn't address the concern raised by not being able to get to your data. The only way the comparison makes sense is if you are not allowed to move your furniture out of the apartment and if you don't pay your rent you lose your furniture too."

Actually, that is a great comparison. In your example of MS Word, you could certainly move your data (furniture) out before the subscription (lease) runs out. You can likely move it out while retaining all of the formatting (presentation, interactive functionality) if you are moving into a new comparable system (another similar house/apartment), or you could move the raw data out into notepad if you aren't (in which case it would be in much the same state as your furniture if you didn't move into another house).

Also, you are incorrectly assuming that you loose the files themselves. You still have and own the actual .doc files that you've created.  You can easily import them into your next system, if you choose one that offers that option.

The "not paying your rent" comment then isn't particularly correct either. If you don't pay your rent you loose access to the house but retain ownership of your furniture. If you don't pay your subscription you loose your access to the system, but retain ownership of your files, which you can then decide what to do with.

"When I buy a regular license for MS Word, it works forever. If I buy a subscription, it STOPS WORKING when the subscription runs out."

This argument is off point. The originator of the discussion's statement was that if the pricing favored the subscription model *based on the typical usage patterns*, then he felt customer's would choose the subscription model. You can't argue the original statement by disregarding a qualifying statement in the original postulation.

Your comment that "MS wants subscriptions so that that can continue to soak people for money without actually offering new features." reveals your true point, which is that you don't trust Microsoft and feel that they must be trying to trick you. That may be, but to arrive at that point it would have to be backed by facts.

Personally, I agree with Jeremy's opening statement and the theories backing it. Subscriptions might allow the company to lower the overall cost to the customer while retaining their overall revenue and profit levels due to the lower barrier to entry and overall cost of use. I'd even add to it by submitting that even if the overall cost was higher, a likely sizeable market would still exist for it due to the more flexible cost basis (Similar to the auto leasing market).

JWA
Friday, November 01, 2002

Shame on you ! You're typing your PhD thesis with Word !!! Ever heard about LaTeX ?

Out of subject
Friday, November 01, 2002

If you believe you can provide a cost benefit with subscriptions, offer both choices.

Anyone know the status of the EV1 leases? GM did not allow people to purchase the EV1, only lease it. They have chosen to not extend leases beyond this year, even though people have actually sent them money requesting a purchase or lease extension. These people are about the lose a car they like, all because the owner no longer wants to support them, for whatever reason (probably political, but that's irrelevant).

The other flaw with the apartment analogy is the physical presence of the apartment. If you don't pay your rent, someone else can pay it and take over the space; your payment of software 'rent' has no bearing on other customers (of non-server based systems).

mb
Friday, November 01, 2002

We were revisiting this subject just yesterday and came down in favour of a rental model for our stuff, a choice we'd built into our business plan 18 months ago.

ISTM that most of the responses here are looking at the case for subscription software without thinking about what would be offered by any sensible supplier.

Only a madman would rent software that locked you out of your data when it expired. If your data within the tool goes read-only then fine, you should still be able to export it to a range of file formats.

Second, most software renting firms will offer escrow insurance so that if they go pop, the renters are able to get the source as a last resort. Given the continuity of reveue that the supplier would have, then provided they'd not completely screwed up their choices of market, product and price, then they should be able to scale thier costs to fit their revenues. I know a few of the project management portals have gone bust. I'm not sure what the story was there - perhaps they needed to invest more upfront in infrastructure than their revenues could support. Then the Dotcom crash blah blah blah.

Rental actually makes more sense than buying in many situations - scalability being one. Imagine your team gets a much larger project than you normally deal with, necessitating the addition of dozens of contractors. Buying a copy of all your development/testing/management tools adds a significant finance hit on capital, with no way of recouping that cost later. Being able to rent the extra development kit for a few months and then stop paying for it makes a good financial choice.

I don't see any difference between renting software and leasing of other capital equipment, which has become the norm. The problem for Microsoft and the big guys is that thier customers already *own* licenced product - they've already taken the hit on their capital and depreciated it against their business costs and can't see a convincing reason to convert. New companies offering new products (like us!) should think carefully before rejecting the idea.

Mark Smith
Saturday, November 02, 2002

This whole debate centers around the issue:

    Can you get the customer to rent?
    Can you get the customer to jump on the subscription.

There is simply no debate that a subscription type model is the way to go for software. The problem here is coming up with a way to get a customer on the subscription band wagon.

IBM, and especially Oracle, and just about every major player in the computer industry is subscription based. Or sold on a maintenance type contract (IBM for example). Oracle has what, 97% renewal rate every year…wow…talk about a lucrative business.

Microsoft is just looking at the rest of the industry, and going ..

                  Duh……

(or wow…look how everyone else makes money…we are doing it the wrong way!!).

The only dim wits in this whole software industry thing is Microsoft, and they are now realizing that all their competitors have been doing business differently for the last 40 years. (yes..40 years now). Do anyone actually think that IBM cares about selling you some software? No, they want a maintenance or “cost” of use type contract. When I talk to a Oracle employee, they always tell me that IBM prices their software a bit lower then Oracle, but then they make it up in the maintenance.

At the end of the day, the cost of paying the employees and costs of developers between IBM and Oracle are about par (in fact, he admits they are about the same cost as the end of the day). In other words, they cost what they cost, and it is that simple.  They do not pull a price out of a hat. They charge based on what it costs them to develop and maintain the software. Along the way they do of course make some good coin, and that is why they can pay their employees a good rate.

MS just realized that they have sold the farm, and now are tying to get some of the chickens back. The problem is that we all bought chickens that lay eggs for us every year now, and we don’t want to give up those chickens, and start paying for them to lay eggs.

It is only the PC based industry that actually sells you the software. Now that the industry has matured, it is becoming like the rest of the computer industry has been since day one.

What does software cost to run? Hint: it is not the cost of electricity!

As Joel pointed out, software does not rust. I bet the auto leasing industry would love cars that don’t wear out. Just ask Oracle and IBM….

Microsoft originally viewed the software industry as a publishing industry.

IBM and Oracle view software like equipment leasing.

Either business model can work, but you have to decide which one.

Albert D. Kallal
Edmonton, Alberta Canada
Kallal@msn.com

Albert D. Kallal
Saturday, November 02, 2002

"There is simply no debate that a subscription type model is the way to go for software."

For who is there no debate and why do you make that statement?

X. J. Scott
Saturday, November 02, 2002

"Microsoft is just looking at the rest of the industry, and going ...  Duh……"

Baloney. They want the money but they're not going "duh".

Microsoft was the first company to sell software. (at least on microcomputers). They were one of the major players in *creating* a whole new market which just didn't exist before, a lot of which was based on the whole software purchase scenario.

Also think about the 'free software' universe and the blatent copying which was the foundation of much of the creation of the whole 'web' market.

As an individual, I never lease anything unless I can predict in advance the length of the lease. So I'll rent a car or a bicycle if it's for a day or two, will buy one if it's for longer. I just don't want other people to control it.

A business on the other hand has totally different concerns, and often is better off leasing everything if they can move support costs to the lessor.

mb
Saturday, November 02, 2002

Just a correction: Microsoft does not sell software. They license software. They're quite adamant about that.

mb
Saturday, November 02, 2002

>>There is simply no debate that a subscription type model is the way to go for software."

>For who is there no debate

Well, I guess there is no debate on my end!!

As mentioned, I stated *if* you can get the customer to jump on the band wagon. “IF” is a very big word here.

>> and why do you make that statement?

Because it is dead obvious.  What computer company on the planet does not understand this? How in the world can a company sustain a business model without a pay per use?

Ms-word is now done. Should the company now just fold up and go away?

What business produces a product that does not wear out, and adds value to the daily operations of a business? A person would be nuts not charge for this. If the industry is new and young, then fine the next version of Excel that comes out can offer compelling reasons to purchase it.

In the 1950’s, they came out with a new fighter jet every 2, or 3 years. Today, a new fighter platform will probably last 30+ years. At least planes do wear, and have a cost to run. Some old bombers where obviously much more mature as a product, and thus some old ones from the 1950’s are still used today.

Fully 60% of the market is still using office97 (that number is a bit old, and things might be better now).

They should have been charging me $40 a year to use word (and at that price, I would gladdly payed it…since it is much cheaper then purchsing the whole product all at once). They did not do this, and are now faced with a very dubious revenue future. I cannot see how the current business model they have is sustainable.

How will they make money from ms-office? Can anyone explain this to me?

This whole issue is so dead obvious. Just look at the rest of the industry such as IBM, Oracle etc, and see how they operate.

2 + 2 = 4

Companies such as IBM and Oracle make you pay, because they have a sustainable business model.


Of course, MS does have a brain, and is now trying to change its business model. The problem is, so do consumers, and they are barking at his idea.

Why the heck should we give up our current model?

By the way, Microsoft got big and successful at selling software as a package, and not a pay per use (IBM and the rest did not adopt, or get big this way). The problem is, now that the industry is maturing, the software as a package model will not work. They make tons of money right now because a copy of windows ships with each new computer. Already, we seeing signs that people don’t need much more than a 1ghz pc.

If the auto industry made cars that don’t wear out, then a different business model would have to be adopted here. To bet that next year some new type of car will come up to save the whole industry would be so stupid.

The idea that next years version of office is going to be so good that I have to run out and purchase it is utter stupidey. MS knows this, and so do I!!

The problem with other examples such as cars, and planes is that they wear,and at the very least have a high cost to run.

Software does not rust, and has a low cost to run.

Again, my statement will perhaps make more sense:

Are you in the publishing industry, or the “software” equipment industry?


The publishing model works for entertainment and consumables. When software matures, then that model does not work.

If someone can give me an example of a software company with a  mature product that still is in business, and does not charge for a pay per use, then I might have to corrected here!

IBM knows this, Oracle knows this, MS knows this, and gee..so do I.


Albert D. Kallal
Edmonton, Alberta Canada
Kallal@msn.com

Albert D. Kallal
Saturday, November 02, 2002

I'm really impressed with the quality of discusion! This is much more than I was hoping for.

I'd just like to comment on one thing:

>> The other flaw with the apartment analogy is the
>> physical presence of the apartment. If you don't pay
>> your rent, someone else can pay it and take over the
>> space; your payment of software 'rent' has no bearing
>> on other customers (of non-server based systems).

It's true that one person buying a subscription doesn't affect other subscription holders, but that doesn't discredit the argument. If nobody is paying rent in an apartment complex, then that building won't stay open for long. Similarly, if nobody is paying to use the software, then that company will collapse. It takes money to run an apartment complex -- just like a software company.

Another interesting aspect of the analogy is that an apartment is "feature complete" when you start renting. If it doesn't have a pool or a parking garage, chances are it will never have those things. However, from time to time, the apartment will get a face lift. After 30 years of use, it begins to look dated. The landlord then spends a bit of money to make it look current again. This might be done to continue to attract renters, or possibly to keep the current renters happy.

I'm a Mac user, and recently upgraded from Office 98 to Office X. I could have comfortably run the older version in emulation mode for some time, but Office X just looked right with the other applications for Mac OS X. It doesn't add any new features that matter to me, except that it looks current. The downside is that it cost me several hundred dollars. I would have rather had a subscription that included this upgrade as part of the cost.

Jeremy
Saturday, November 02, 2002

Why not just switch to read-only mode once the subscription expires? That way, the user still has access to his data, but the product is also no longer usable. In fact, isn't that what Microsoft is doing right now? There are free MS Word readers available for download on their web site.

Sam Unoyon
Sunday, November 03, 2002

Whats funny is the "If i choose to stop paying then i can't access my stuff in that format" theme. Umm... Can we say "Duh"?

Well.. if you choose to stop paying, thats your choice not that of the person renting the software to you, and you obviously make proper arrangements prior to exercising that choice unless you are a dolt, which isn't the fault of the person renting you the software is it?

Looking at the apartment rental analogy, if you know you won't be renewing the lease do you make arrangements to move your stuff out at a conveniant date or do you think you can leave it there and come back and get it 6 months after the lease expired?

I personally think rental is a great idea providing it remains an *option* rather than the only way to get hold of something, and it allows for both long and short term rental.

Robert Moir
Sunday, November 03, 2002

"unless you are a dolt"

Huh! So I'm a dolt if I stop paying for rentals.

I guess then the best way to make sure I won't be a dumb dolt is not to rent in the first place and avoid that problem.

Thank goodness the free marketplace ensures that I will always be able to buy what I need outright and not get locked in to some absurdly restrictive rental agreement. But don't let me stop any of you all from switching over to rental. I'm behind you 100% in your endeavors. I'll just be over here doing things a different way. I guess because I am stupid and don't know nuthin' bout business. Give the customer what he wants? So passe! Oh well, I'll be passe then.

The Anonominator
Sunday, November 03, 2002

uh... Anonominator you might try reading the whole post and replying to stuff in context.

Robert Moir
Sunday, November 03, 2002

Like I said, consumers now have some software. Why should they pay for it?

The real problem becomes sustainability. You can go the local computer store and look at the “clearance” bin.

You can find $3000 systems for $20 bucks.

The problem here is that software has value in its use. If no one else is using it, then it is not very valuable. In addition, what serious company wants to purchase a product, and make a investment to use that product if the company has gone bankrupt?

No serous company will go out and purchase used software just to save some money with the prospect of no support.

Sure, you can purchase software for a price, and then walk away from the company. Do you want to use a product from a company that does not exists anymore 5 years down the road??

I guess some people do. Right now this whole thing is shell game, since many companies will sell your software, and NOT ask you for some type of maintenance fee for it. This fine for small software investments. Many people purchase disposable razors, and I have no problem with that. However, most companies digging holes in the ground don’t purchase disposable trucks.

Also, some people are willing to take a risk, or “the” risk in the hope that the company will still be around in 5 years. Again, I have no problem with people taking this risk. However, as the stakes get higher and higher, then the idea of risking a portion of the company operations on the “hope” that the software vendor will be around in 5 years is a risk that companies are not willing to take. This cost of doing business has to be considered.

If the system you think is only going to cost you $5000 up front, and then 5 years later, that company does not exist, and you now have to replace the system with a $30,000 system, you might very well be in trouble. In fact, it can ruin the company financially. At that point, I will bet any company wished they had been paying $150 bucks a month.

Heck, why pay $100 for a word processor when you can get a old used one for $10 bucks?

I am not telling anyone that you have to rent, or pay to use software…I am simply telling you the way it is.  Don’t shoot me the messenger here. I not saying to anyone to rent software. I am certainly saying if you CAN GET your customers to rent..you should.

“can” and “if” are big words here.

Do you want to deal with a sustainable vendor of software or not? Many will take the risk. In many cases, the downside of the vendor going bankrupt is very small, and again no big deal. Much of the software industry does work this way.

In fact, the sellers of many software systems also hope that you believe they will be in business 5 years from now. They certainly may want to take your money and run, but one might want to think how long is the investment in software supposed to last?

I have had clients tell me that a 5 year life span for a $10,000 software job is fine. The problem is, we are already 3 years into that project, and replacement prices for similar products are asking $10,000 per year! They are refusing to pay $10,000 per year (that is why they went with me in the first place!!). In fact, they are now starting to complain about general pc support costs (nothing to do with me). Amazing, but I will guarantee that this client will NOT WANT fork out another $10,000 in two years. By the way, they are not on a pay for use contract with me. However, that other company that sells the system uses Oracle for their system, and they have a very high cost. The client of mine was shocked at the price of the other system. Well, that is what the other system cost to run, and it is not a “magic” number pulled out of a hat. Systems cost what they cost to run. It is that simple.

Do you want a sustainable business model or not? IBM, and Oracle have this model…Microsoft does not, and is trying to change.

Albert D. Kallal
Edmonton, Alberta Canada
Kallal@msn.com

Albert D. Kallal
Sunday, November 03, 2002

"Microsoft was the first company to sell software. (at least on microcomputers). They were one of the major players in *creating* a whole new market which just didn't exist before, a lot of which was based on the whole software purchase scenario. "

What rock have you been living under, mb?

There was a very mature micro-computer marketplace well before Microsoft was a drunken college dream of BGs.

The IBM PC, which was the start of Microsoft came in fairly late in the Microcomputer timeline. There were any number of S-100 Z-80 systems out there before the PC came along. Apple existed well before then, with Visicalc. The Radio Shack TRS-80 existed. Oasis existed before that, with a lot of unbranded applications (it was mostly a vertical market). There were commercial applications for CP/M.

Microsoft did not create a market. They just managed to take over the existing market. And, once the PC was cloned, they did it on a single basis: Floppy disks would work in systems from different manufacturers, this being a major problem with CP/M.

Evan
Sunday, November 03, 2002

"There was a very mature micro-computer marketplace well before Microsoft was a drunken college dream of BGs."

Quite possible. I wasn't particularly cognisant of much of anything in 1976 (Gate's infamous 'open letter to hobbyists'*). But my computer history sense is that the Apple ][ (1977?) was the first major microcomputer. Guess what? I also believe the Apple ][ BASIC was a Microsoft derivitave.

However I certainly can remember when the competition was much more fierce and diverse, and Microsoft was the 'alternative' choice for many products.

Oh, and Microsoft really wants much more discrete licensing terms than even one year. Want to spell check that document? Pay more. Funny that, considering so much of their strength comes with bundling everything along for free.

I'm not quite sure everyone's on the same page in this discussion. Some people (Albert and others) claim that if you're a company, rental is the most rational thing to do. Others claim that as a user, purchase is the most rational thing. I claim there's a whole risk-reward spectrum, where unsupported free software (no dollar cost, you can fix it yorself, but no one to sue) is at one end and 'supported' expensive 'rentals' with proprietary formats are at the other extrme (high dollar cost, it gets fixed for you, but you can't even fix it yourself--they have you in their grip, and you hope they don't squeeze too hard, let go, or disapear). Individuals will trend one way, and enormous corporations will trend the other, but everyone will make multiple choices in the spectrum.

If you believe that rental is the way with your company, price your purchase option to match--maybe they have to buy your company if they want to buy the software outright.

* This looks like a good URL to get the letter from, I haven't looked at the rest of the site:
http://www.msboycott.com/archive/microfits/misc/gatesopenletter.htm

mb
Sunday, November 03, 2002

"if you're a company, rental is the most rational thing to do"

Yes, about that -- is that even really always true? I can see that it would be true if it was leasing where the customer was signing a contract promising to rent if for X months...

But wouldn't it be better for companies in a lot of situations to try to recoup their development costs as soon as possible through a sale price, rather than hope to eventually recoup it over a number of years through the rental cost?

Lacking a contractual leasing situation, I see two choices: A lot of money for the company right now while the product is fresh and there are no competitors, or a little bit of money each month over a long time, hoping that competitors don't appear on the scene, lure customers away and destroy all hope of recouping tremendous development costs.

A lot of people would love to be able to rent Cadence for a year or two rather than commit to a license that costs hundreds of thousands of dollars. But Cadence makes its money selling those licenses to the relatively small number of companies that design chips. Would they even be able to stay in business by merely renting month-to-month?

X. J. Scott
Monday, November 04, 2002

"But wouldn't it be better for companies in a lot of situations to try to recoup their development costs as soon as possible through a sale price, rather than hope to eventually recoup it over a number of years through the rental cost?"

Unless of course you are devious enough to start with a rental fee that has you recover development costs very quickly. Then the long term spells a goldmine. Maybe that is what most people are afraid of; being milked as someone elses cash cow.

Erik
Monday, November 04, 2002

Well when I suggested that rental should be an *option for those that want it* rather than the only way to obtain the software, this has a nice side affect knowing a price for rental and a price to buy and being able to compare them would enable people to make an informed decision and keep the vendor "honest".

Robert Moir
Monday, November 04, 2002

Both models is indeed a good point. At least that way the appartment analogy fostered by some would be more valid. Don't want the hassle of relocating, buy a home.
Of course smart competitors could take this stand. Provide seemless migration and enough similarity in funtionality and you might start gaining some market share. Not an easy task, and probably very difficult to gain sufficient momentum...

Erik
Monday, November 04, 2002

Software doesn't rust or wear out - but computers do. It seems to me Microsoft are gradually aiming towards a licensing model (and Microsoft do NOT sell software) that ties the license to a specific computer. That way they have a revenue model which beats either outright sale or rental:

It beats sale because the customer will have to come back for more some day

It beats rental because the payments come 'up front' and not spread across the product's lifetime

Also in the case of accidental damage (fire, explosion, flood) or, as we have just seen, sale of assets, the licenses will instantly expire & need replacement.

Max Hadley
Monday, November 04, 2002

I've only skimmed most of this discussion, so forgive me if I'm repeating someone...

My main objection to subscription-type software is that it pretty much forces users to upgrade. Anyone who has weathered the Access 97 to Access 2000 "upgrade" debacle [or insert your own favorite version-change horror story here] knows that {newer version} does not imply {better version}.

Martha
Monday, November 04, 2002

Martha, I couldn't agree with you more. I think it should be up to the user to choose the version they want to run. If they want to run the same version for five years, then the license should support that -- subscription or otherwise. It should be up to the software developer to create compelling products that are easy for the user to upgrade to.

Jeremy
Monday, November 04, 2002

Well its the carrot and the stick isn't it. Which does your vendor use in order to make you upgrade?

And while I don't believe in just beating on your customers so i wouldn't sanction just using the stick, at which point does using both together become a good idea.

Robert Moir
Monday, November 04, 2002

Strangely miopic this discussion.

Everybody is presuming that renting is better than selling, and yet of course it all depends on the price you rent at. If the annual rent of an apartment is 25% of the total value then builders will all wish to rent instead of sell, and there will be a great demand to buy. Put the annual rent at 3% - 5% of the total value (which was what it was running at in Barcelona three or four years ago) and renting becomes an interesting proposition, but you can guarantee that nobody is going to build to rent.

An OEM version of MS Office costs around $150. Put the rent of Office at $10 a year, or $1 a month and plenty of people will rent. The difficulty lies in getting people to pay through the nose to rent, which is what as software developers you are obviously interested in doing.

And just to annoy people a little bit more may I pioint out that when most people have bought a Jpohn Grisham book and seen the film, then he goes out and writes another one instead of looking for a way to maintain his cash flow withoug producing anything in return.

Stephen Jones
Tuesday, November 05, 2002

Well said, Stephan.

X. J. Scott
Tuesday, November 05, 2002

Sorry, I mean Stephen.

Yes - the entire argument about renting does not apply to immature products and the entire argument for mature products presupposes that it is economically desireable for Microsoft or whoever to create one program and then sit on their butts for the rest of eternity, collecting money, while expending no effort.

Nice work if you can get it.

X. J. Scott
Tuesday, November 05, 2002

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