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Big Bangs and Software Subscriptions

In the last ten years there have been big changes in how people purchase and consume products and services. Napster, Kazaa and Torrent were technologies that provided a lot of the groundwork technology for companies like Spotify and Netflix.

Only lately have software subscriptions become more commonplace with Adobe, Microsoft and now JetBrains, a developer tooling company, is moving to a subscription based model.

It's easy to think this is just companies sourcing a steady stream of income (it is!) without benefits. But it's not all bad.

Web platforms like Twitter and Facebook can't work with major yearly releases. These companies do constant changes to their products. This is very transparent on the web, but it can be applied to desktop (productivity) software as well. You introduce minor changes and improvements at a faster pace, leading to faster development cycles.

Buying shrinkwrapped software certainly seems like a thing of the past today. Most people in my generation have already switched from physical music and video distribution and I don't see why software should be any different.

There will always be exceptions cases such as specialist software and purchasing LP records for sentimental reasons.

Freedom and competiveness? Orly?

Subscription software removes the upfront investment to a product. Depending on the contract terms you can purchase products for relatively short periods. This gives people access to software they need sporadically for a short period of time. Subscriptions also free you to try competing products for evaluating and drives adoption since (theoretically) everyone is always on the latest version - just as with evergreen browsers.

Enterprises are used to paying for yearly licensing fees, so this is a not a new concept for them. I have not followed how licensing works for enterprise products such as SAP or others, but Microsoft Office suite is already widely deployed via 365. For SAP, Dynamics CRM and other enterprise applications a continuous release model could remove (or significantly alleviate) the needs for large scale migration projects.

Web applications like Google Apps carry a different ethos and are more naturally seen as services, not packaged products. Many companies are even outsourcing their most valuable daily tool, internal communication, to external services like Slack and Flowdock. This is like privatisation of communal water works, only to curse high necessity prices later. To me that is a much harder a dependency than a cancellable subscription to an IDE.

Having access to the latest can give businesses a significant competitive edge. This is why it's fair to charge more for productivity applications than entertainment. Music and video subscriptions are for wasting time and have no (direct) return on investment. Worst investment ever - yet that's what millions of people do and voluntary market as the best thing since sliced bread and strong psyche medication.

This is why I've got no issues in paying twenty bucks a month for having access to software that helps me 20 days out of 30 in a month. I know costs add up, but as a business leader I would critically evaluate their policies on subscriptions and changing the mindset of software from a durable good to a consumable.

Are you really in the business of filling your shelves with redundant software?

Update: Added this excellent comment from Reddit:

Because Netflix pulling a show mid-series is annoying, but software you rely on for work closing down mid-project destroys your business?

Because Netflix and Spotify offer a vast library of content, probably far more than you could ever watch or listen to in a lifetime, while subscription software typically offers a single product or set of products that you used to get as a one-off purchase?

Because Netflix and Spotify add lots of new content but you can take it or leave it, while subscription software may or may not actually add any new features for a while or, worse, may make changes you actively don't want?

Because the cost of buying a permanent copy of everything you watch on Netflix or listen to on Spotify would be far higher than the subscription cost, while the cost of buying a permanent copy of software typically works out far lower than the total subscription cost over the useful lifetime of the software? (And because this is often still true even after you factor in buying newer versions of permanently licensed software at upgrade rates?)

Written by Jani Tarvainen on Thursday September 3, 2015
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