Thinking Outside the Box – Why How We Purchase Software Has Changed

Remember back in the day when software used to come in a box?  I thought it had all gone by the wayside, but while shopping in a few stores over the weekend, I stumbled across some software in a box.  It made me stop and consider the last time I bought any type of software off the shelf, in a store, or even online?  There used to be something exciting about pulling a box off the shelf, reading all about the new and exciting features and how it was going to change my life.  Admittedly I miss that feeling, but then I thought to myself, 'do you remember how frustrated you used to get because you could not actually try it out first?' Or, 'how did you feel when you installed the software and found out they just released a new version two weeks later?'  Now I remember why purchasing by the box has taken a back seat to the new normal of software buying.

The purchasing of software has changed, and it will continue to change as we approach each new decade.  While I admittedly fought these changes initially, I have come to see the tangible reasons for the software developers shift in the way they sell and deliver their products.  For example, I am a huge Adobe fan and use most of their products.  When they decided to go with a subscription-only model a few years back I was less than enthused.  What? I would not be able to 'own' my beloved Photoshop or InDesign any longer?  I had to pay rent?  I don't get to put a box on my bookshelf? This will never work!!  Well, I went along with it (like I had a choice) and I have to say, I now love it.  I didn't see why there needed to be a change at the time, but I do now.  I don't think I am going out on a limb when I say that, one day soon, all software will begin to follow the subscription model.  Why?  Because it is a win-win for both developer and user in the end.

Let's take a quick look at both models to help illustrate:

One-Time Purchase Model - The theory here is, pay a large one-time up-front cost (also called 'front-end') and receive updates and patches when needed.  The idea is that you are paying for the updates and patches on the 'front-end' until a major 'New Version' comes out chock-full of new code that will need to be repurchased.  Some developers charge a Maintenance & Service fee between upgrades to help offset development costs between versions.  This is not a win-win, but more of a 'win/lose – win/lose.’

• Developer - Wins by selling new product and getting a large chunk of money on the front-end, but then loses over time because they must chase the curve of developing towards a new 'bells & whistles' release to attract new customers, instead of fine-tuning and tweaking the last release for current customers. Loses by experiencing potential income loss during development portions of the curve.
• Customer - Initially wins by getting an excellent product, but over-time loses because the product is not getting the 'fine-tuning' it deserves and needs, and winds up paying for the next major release of a non-fine-tuned product.  Often the software becomes disjointed and bloated over time due to the ‘bells and whistles.’  Potential loss by having to pay for product updates or maintenance & service fees.

Subscription Model – The basic idea here is to evenly spread out the costs of development with the income stream over time.  There are no new major version releases in this scenario, only real-time updates and patches.  This fits the cloud perfectly as updates and patches happen on the cloud server side, not the customer side.

• Developer - Although the developer does not receive a large sale up front to help with initial development costs, they do win by receiving a balanced residual income on a monthly or annual basis. There is no longer any need to charge for updates or upgrades, potentially upsetting the customer-base.  Reduction in sales spikes from new release to new release.
• Customer - Wins by always having the latest and greatest version at their disposal at no extra cost. Instead of a large outlay of cash, they have the choice of month-to-month or annual payments.  With month-to-month they can quit any time they wish if they are not pleased with the product.  However, they can typically save money by paying annually. Customer also wins by never having to pay extra for updates, upgrades or maintenance fees.

With leading edge programming tools, software development has sped up considerably in recent years.  The days of waiting 1 to 2 years between major releases has all but vanished, and real-time is at the door, knocking.  It no longer makes sense for developers to sit on new code for a major release because it would be ancient by today's standards.  And this is what I love about Adobe's subscription model, you always have the latest and greatest version, and at no extra 'surprise!' cost.  They let me know when there is an update out, I tell it to update (or I could set it to update automatically, although I have not let go of that control yet!) and I seamlessly have the best version.  This is not the only reason for my affection with the new model.  It has also allowed Adobe to include all their products in one bundle, and with one monthly, affordable fee.  I now get to experiment and enjoy all the high-end applications that I would have never been able to before, due to the front-end cost of each individual product.

Whether moving to the cloud or not, mainstream software developers going to a subscription, pay-as-you-go’ model is inevitable.   Aside from all cloud players already there, all other big names have either made the switch or are considering it: Adobe, Microsoft, and Sage Software just to name a few.  Also in the mix will be most of your mobile apps.  Apple recently paved the way on its App Store allowing developers to move to a monthly or annual subscription model instead of a one-time charge.   To ‘subscription or not to subscription’ is a plight that many developers are having to battle out in their boardrooms.  It is a struggle for them due to some backlash regarding the model.  This is especially true amongst longtime loyal customers who feel like they ‘own’ the product.

For a little nostalgia, grab all your old software boxes, dust them off and put them back up on your bookshelf.  It will be a reminder of a bygone era, and hopefully not one that we look back on fondly and say, “I wish it were that way still.”