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By Jim Rapoza  |  Posted 2004-11-01

Unsubscribe Me

Great news! It looks like that bad old practice of perpetual software licensing is going to go the way of the dodo. No longer will you have to deal with the inconvenience and hassle of paying once for software and getting to use it whenever you want to and for as long as you want to.

According to a study released at the recent SoftSummit conference, everybody just loves subscription- and utility-based licenses for software, except for some dinosaur companies that will eventually come around to realizing how stupid it is to pay once for software and use it as much as they need to.

Click here to read what a software-industry panel had to say about subscription and utility licensing.

And whats not to like! With a subscription model, you only have to pay a simple monthly fee to use an application in your company. Sure, the monthly fee is high: It will probably be years before subscription fees come down to a level thats actually competitive with what people pay for a perpetual license. But whats important is that the software vendor gets regular income.

And dont even get me started on how great utility licenses are. I know I love paying my constantly changing electric and phone bills at home. I cant wait to have to pay a charge every time I fire up a program. Maybe we can get to that nirvanalike state where the software vendor not only charges you for how often you use a program but also for how much value you get out of it.

I can see it now: "Jim, we saw that your Oct. 4 column was really good, so were going to charge you an additional fee for the extra value you derived from our software."

OK, Im exaggerating—a little. But when software vendors start touting the benefits of subscription and utility pricing, a little skepticism is always in order. Every time I see software company CEOs talk excitedly about utility licensing, I half expect them to contentedly light up cigarettes afterward.

Thats because most of these vendors really, really want these types of licenses to take off. They want to be freed from the constant revision cycle and the fears that customers wont upgrade to the latest versions. They want the constant, reliable revenue streams that subscriptions and utility licenses can provide.

Next Page: Wishful Thinking by Vendors

Wishful Thinking

But when they start saying that these licenses will eventually replace perpetual software licenses, they are most likely engaging in wishful thinking.

Now before you start sending angry responses, just let me say that I am not against subscription and utility licenses for software: For certain types of applications, they make perfect sense. One only need look at successful service-based software companies like Salesforce.com to see how well a subscription-pricing model can work and how much sense it makes for products like these. Similarly, utility computing can make very good sense for many server-based applications.

Click here to read about Salesforce.coms new on-demand call center and help desk application.

But there are many, many applications where the most sensible and affordable pricing model is and always will be a perpetual software license. And this goes double for desktop applications. When I hear vendors of desktop applications wax poetically about utility licensing, I often want to ask just which fantasyland it is they live in.

In fact, the more I think about it, the more I believe that percentage of software offered through perpetual licenses wont go down one bit, at least not so long as customers have it as a choice.

Think about it. One argument for utility and subscription pricing is that people pay that way all the time in their everyday lives. But how much of it is done by choice?

For example, if the cable company gave people the opportunity to, say, pay a single $3,000 price and never pay again, how many customers would choose it? What if the utility companies did this? Well probably never know, although, by comparison, more people buy cars than lease them.

So to vendors I say, dont try to force your customers into license models that they dont want and that dont make sense for your product. Only use subscription and utility licenses if they make sense for your product.

Hmm. Now that I think about it, I wonder if I could charge readers a utility fee for every word they read?


Labs Director Jim Rapoza can be reached at jim_rapoza@ziffdavis.com.

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