I’ve been around this industry long enough to remember when ALL software was a lease arrangement. Of course, this was in the days before the PC, and IBM (and other mainframe vendors) generally had arrangements that went along with their “turn-key” mainframe installations that covered the software that ran on the machines. Of course, that software bore little resemblance to what we now know as software, as it consisted mostly of operating systems and compilers. The applications themselves were written in-house, using the IBM compilers to generate the executable load modules. The leasing was annual and included updates.
When the PC came into being, software moved from that mode to a mode where you would purchase it and load it on your computer. After a short time, as the fledgling software industry developed and grew, that “sale” became “licensing,” using a model where you purchased a license to use the software on your computer, but not the software itself. That way, ownership of the software stayed with the software company, but you had the right to run it on your PC.
That model has remained in place until only recently. A few years ago, some companies began modifying the terms of their licenses so that expiration dates were built in. At first, they marketed this by saying that it provided the benefit of including automatic updates. At first, this approach was used by the anti-malware software vendors, as the software was useless without daily updates. People paid for a year, got the software, loaded it on their computers, and it ran for a year. When the year was up, it just quit updating, which, of course, made it useless. While obviously a good model for software that required a daily update, it just didn’t work for software like Microsoft Office, where you just wanted the traditional licensing and were able to use it until you decided an upgrade was justified.
With the advent of ubiquitous broadband Internet, it has become much easier for software vendors to update their software. Updates are frequent, but not upgrades. Updates are fixes, security patches, etc., where upgrades are actual improvements to the software (the next major version, if you will). So why not just lease the software and provide upgrades, as well as updates? While it seems like a new idea, it’s the same thing IBM used to do in the mainframe days, albeit on a much smaller scale. Now that updates (and upgrades) can easily and rapidly (and painlessly) be pushed to software users, why not change the model?
Yesterday, Microsoft released MS Office 2013 into the wild. The pricing indicates that Microsoft doesn’t make enough money licensing their software. Why not? Because if the software is good, you’ll have no incentive to want to upgrade (e.g. pay them more money). Witness how many people still use Office 2003 (which was replaced by Office 2007, which was replaced by Office 2010, which is now being replaced by Office 2013). They still use it because it still works for them! Why upgrade when it does what you want? Should you buy a new car just because your car is 3 years old? If there are other compelling reasons, then sure. If not, why not stick with a perfectly good 3 year old car?
Microsoft has priced Office 2013 in an obvious move to get people to move from the licensed model to the leased model. They want you to switch from paying for the license to paying a monthly fee for the privilege of using the software. In return, they promise not only updates, but upgrades as well. And they throw a few other things in for additional incentive (Skype, SkyDrive extra storage, etc.). Adobe has done the same thing with their Creative Cloud. For power users, this works well, and they don’t mind paying to get the perks of constant upgrades. But for others, this model just seems a way to keep the money flowing out of their pockets. Clearly, this is the way software licensing is moving. Adobe has said that they will eventually discontinue their creative packages, in an effort to get users onto the Creative Cloud. Microsoft has done the same thing with their pricing of Office 2013 licensed versions. Wave of the future or wave of the past?