The Subscription Model for Software: How It Will Soon Affect You.

The subscription model for software has been receiving a lot of buzz in our industry lately.  Yet, this is not really a new thing.  You have probably been using this model without ever realizing it.  Think about the antivirus packages we have all used for years.  You purchase a package, be it Norton, McAfee, Kaspersky, AVG, etc., and you get the antivirus protection and essentially a subscription to any updates to either the program or the virus definitions they develop.  Netflix is another common example.  It has been used from the beginning, anyone remember AOL?  It was a subscription.

Now this model is being deployed for business applications, and not from companies you have never heard of.  Adobe, with their Creative Suite, and Microsoft, with Office 2013, are adding a monthly payment option.  This may help many small businesses with their cash flow.

office2013Let’s consider the example of Office 2013.  You have the option of paying $399.99 (Staples price) for the full version.  This gives you the license to install and use the product on one machine.  Or you could go with the subscription model.  For $15 per user per month, (or $12 per user per month if you pay annually), you get the full package, and license to load it onto five separate devices per user.

I know this is a little confusing, let me try to explain.  You will need a separate license for each user.  Each user can install their license on five devices.  If you have an employee who does some travelling, for instance, they can load the same Office onto their office desktop, their laptop, their home desktop, and their tablet.

There are some advantages for the consumer in this deal.  Any updates are, of course, automatically installed.  So are any version upgrades.  As long as you have the subscription, Microsoft provides the latest version of the software to you.  If they release Office 2015, you are automatically upgraded.  Your company owns the license.  If the employee quits or is fired, you can deactivate their license and you still retain it for the next employee.

The other advantage is in budgeting.  Let’s say you have 10 employees.  To upgrade them all at once would run you $4000 plus tax.  Which is why we see so many offices running two or three versions of the software.  With the subscription, you would pay $150 per month and everyone is instantly on the same version.

Now the advantages for Microsoft are fairly obvious.  You will probably pay more in the long run for the subscription than you would if you bought the package and used it as long as possible.  It will also even out their cash flow.  Right now they get a huge influx at the release of a new product and then sales dwindle until the next full version is ready.  With this model, they will have a steady income every month.

You will probably see this model extend to other products including, if the rumors are true, Windows.  There are rumblings that Microsoft is considering adopting this model for the operating system itself.  We’ll see how it goes.

Office 365

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