October 28th, 2005
How many times over should you pay for software?
Wouldn’t it be nice for software developers if they got paid every time someone used their software? Believe it or not, that’s how some old-school software developers interpret the notion of software-as-a-service. In their eyes, creating great software is a service for which they should be rewarded, year in, year out, by the hordes of grateful users who benefit from using their software, even when it’s SoSaaS.
In the real world, users prefer the notion of the perpetual licence, which works in exactly the same way as when a consumer buys a book, a CD or a DVD. You pay a one-time fee, and you can replay the contents for your own private use as often as you like. Of course, music publishers are starting to devise fiendish tricks to thwart that basic principle. The first step was discovering that consumers can be persuaded to adopt a new playback medium every few years or so, necessitating the repurchase of their entire back catalog on the new format. As David Berlind has been explaining in several recent blog posts, the latest wheeze is the use of digital restrictions management (DRM) technology to erect artificial barriers between different format generations (or even contemporaneous implementations by different vendors). Heaven forbid that home networking should thwart the music and movie industries’ strategy of forcing consumers to rebuy exactly the same content with the emergence of each new format generation.
But the software industry is greedy enough to want to go even further. Ignoring the subtleties of DRM — which snares users by glossing over the unseen ties between content and format — vendors from BEA to Microsoft are eager to take up the blunt cudgel of subscription licensing, which merely asserts that, if you don’t pay up again at the end of the year, your software stops working. The best way to deploy the mechanism of subscription licensing, of course, is as a hosted service, because it gives the software vendor the ability to instantly turn off the software-on-tap if the renewal is not forthcoming. Perhaps this explains Microsoft’s new-found attraction to ‘hosted everything’ (whether or not it can work).
A more sophisticated ploy was recently suggested by Murugan Pal, CTO and founder of Kim Polese’s packaged open-source stack vendor SpikeSource. In an O’Reilly blog posting, he argued that the term ’software as a service’ shouldn’t be applied to on-demand vendors like salesforce.com because they offer application functionality rather than software per se (which is true enough). Instead, he went on to argue, the term should apply to vendors who provide and manage software that’s downloaded onto user machines:
"Anti Virus Software is a good example … where subscriptions are charged for virus definition updates and not for the anti virus software itself … when a service is stopped … in [this] model the customer can still run the software (along with their data) without any associated value-added services (like future updates)."
Murugan seems to be advocating a form of disposable razor blades software model in which the basic application is delivered at or below cost, and then the vendor makes money on selling replacement ‘cartridges’ that keep the functionality up to date.
Unfortunately, his plan actually highlights the weak point in most established vendors’ software-as-services ploys; the fact that you pay your annual subscription without deriving any new benefit. Perhaps the most notorious example of this approach is Microsoft Software Assurance, which promised free upgrades within the term of the program, and then largely failed to deliver them. But then, that’s par for the course with a vendor that says ’software-as-a-service’ but means ’software-as-a-privilege-you-should-be-darned-grateful-for.’
Now that no once-bitten-twice-shy customer is going to touch Software Assurance with a bargepole again, Microsoft (to pick just one example out of many established software vendors facing dwindling licence and maintenance revenues) is turning to hosted services in a last-ditch attempt to shore up its income. The advantage of a server=service, hosted software model is that the vendor can command a recurring licence revenue, thus generating annual or even monthly inflows for delivering the same old software — but this time as a service.
There’s just one problem. This perception of the software-as-services model is a jaundiced misrepresentation of the way that on-demand applications actually work. No on-demand customer pays simply for the privilege of accessing the software. They pay because the software delivers business results. And that simple distinction exposes once and for all the clay feet, the emperor’s new clothes, of the traditional applications software industry. Their products don’t actually work until they’ve been tweaked and customized by customers or partners, and therefore the licence of itself has no out-of-the-box value to the end user. Asking people to pay for the privilege of using the software isn’t offering a service, it’s taking a liberty. It’s as much of a nonsense as asking a punter to pay a performance fee for whistling a copyrighted tune. If I’m paying a fee to watch a movie, listen to a song, or use an application, I expect to experience a professional, finished execution.
True on-demand application vendors understand this. Conventional software vendors seem to think the world still owes them a living, just for bothering to write some software.
Phil Wainewright is a commentator and strategist on emerging software industry trends. See his full profile and disclosure of his industry affiliations.
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