Content Insider #297 - Subscriptions
In the Cloud, Software Goes Back to its Beginning
By Miles Weston
"I will speak slow so that those of you with PhDs in the room can understand." - Doug Carlin, "Deja Vu," Touchstone Pictures, 2006
Having been around the software industry from the earliest PC days (and before) it is interesting to see the companies come full circle and the uproar that is surrounding the latest announcements that software would be on a subscription basis.
Much of the furor comes out of a very basic misconception ... that you pay once and you "own" the software.
Unfortunately, that tells me that few people really read their license agreements.
You don't own the software; you own the right to use it.
Most IT people understand the subtle difference because they have lived in the license and service fee world since the big old mainframe days.
The approach continued through client/server and earliest PC days.
Evolution, Explosion - A combination of technologies, new services and commoditization has changed the way people do business today. The cloud and virtual hardware/software put large and small firms on an equal footing. Companies now have ready access to rich content, information. The benefits have moved rapidly to the consumer.
The software industry moved from thousands of customers, to hundreds of thousands of customers to millions of customers.
When the third computing platform hit us less than six years ago, software firms suddenly had hundreds of millions, billions of computer, tablet, smartphone customers.
The software licensing agreements though changed in the early '80s.
1st Killer Package
At the time, we were working with a little company called MicroPro International.
They had developed a very unique word processing application which was the first to provide mail merge and WYSIWIG (what you see is what you get) capabilities.
Trust me, it was really advanced for its time.
As Denny exclaimed, "I need more cowbell!"
Seymour Rubinstein, founder/principal owner, brazenly called the package WordStar - not like it had a lot of competitors.
Big Seller - MicroPro's WordStar not only rose rapidly to the top of the word processing heap, it also changed the way people "bought" their software. And yes, those are floppies for uploading the software.
Initially, it supported Gary Kildahl's CP/M (control program for microcomputers) and later for DOS (disk operating system) that is still the basis for PC systems.
Most of the sales were to PC manufacturers (like Osborne) to bundle with their systems and everyone was happy ... you called the manufacturer when you had a problem, not MicroPro.
Seymour wanted the company to grow, really grow, and be used everywhere ... including in the systems from the fledging fruit company.
Spreading the Word - Seymour Rubinstein not only understood the early user's needs but the channels for reaching them were much narrower than they are today. And the only thing online was bad spam.
So he had this bizarre idea of selling (licensing) the package to the end user.
We all tried to convince him it was a dumb idea because you don't sell the stuff, you rent it to folks and they pay an annual fee.
Break with Tradition
"Geez Seymour, just look at what the mainframe/midi system folks do; it's a steady cash stream. It's what pays development and support folks," all of us said in unison.
Well WordStar went on to be the de facto standard for word processing, racking up $72 million in sales in '84. When Seymour took the company public that year, MicroPro was the world's largest software firm and he celebrated by buying a new (modest) powerboat.
And while the company sunk - his boat didn't - one-time user licensing was the accepted way for buying PC software.
Clamored to Own - Really smart people got their computers and bought up the available software for their systems. They signed the user agreement because let's face it, you couldn't read the mouse print and you couldn't interpret what it really said.
You paid for it once and then expected the developer to support the product fully until the next big upgrade was introduced.
That sorta', kinda' worked except service and support teams will bend your ears for hours telling you how users begged, screamed, cajoled them to "just help them this one time for the four-year-old version."
And most of the time, they did their best to assist old-version users, even though policy clearly stated they shouldn't because believe it or not, they really like to help whoever was on the other end of the phone or computer connection.
It didn't really matter that your system/OS/applications were obsolete. It was a time when you didn't turn your stuff every few months.
You knew they had to support you for the life of whatever.
After all, you paid 'em and it was yours ... forever!
And, of course, every phone call costs the company money ... money that could be spent on development people to work on the next version.
Money that could also be invested in handling the undocumented features - you call them bugs - for everyone.
As Agent Pryzwarra emphasized, "We've got some unique time constraints."
Business IT folks like to keep their people working profitably, so they buy a ton of licenses and keep people current so everyone is working (theoretically) with the latest version.
Whether in a small company or a huge multinational, keeping track of the licenses and updates was a bear.
All that info was important because businesses - large and small - live/die on software.
Keeping track of the software licenses, expiration dates and other stuff has always been a royal pain.
That and the fact that IT is changing dramatically, is one of the reasons SaaS (software as a service) has grown so rapidly.
Virtual Software - Companies quickly realized that it was more efficient and more economic to subscribe or rent their software on an as-used or monthly basis, rather than deal with all the software licenses, constant upgrades (for all of the systems) and serial number tracking. It's easy to see the benefits companies can receive from using cloud-based software over packages.
It has made a significant impact on helping organizations reduce their front-end costs, balance the usage and be able to respond more rapidly.
You may not have noticed but businesses are rapidly automating and virtualizing their datacenters.
They've reduced their datacenter floor space, power/cooling, capital spending and operational requirements.
You may not have noticed it but the drive to be able to access anything/anywhere and optimize the use of systems has pushed darn near everything into the cloud (translation big shared service datacenters around the globe) and that means software too!!!
Doug Carlin said with delight, "Alright. Now we're getting somewhere."
Granted, there are hundreds of thousands of ultra-cheap to free apps for your smartphone, so why can't the industry for professional and business apps do the same?
Don't know about you, but I'm not interested in buying virtual world products or watching someone's ad while I have a project to done.
Unlike my smartphone apps, hope to gawd someone out there will provide a software patch or answer my questions.
Pay as you go, pay as you use is what's happenin' and it won't turn back.
If one doesn't keep pace with new features, new capabilities you can switch.
And yes, Adobe took/is taking a lot of heat for moving to a subscription basis ... and they won't be the last.
- It's not like you really bought the product
- Someone had to reverse Seymour's decision
As Denny explained it, "Life, like time and space, is not merely a local phenomenon."