How many times over should you pay for software?

How many times over should you pay for software?

Summary: Old-school software developers believe that creating great software is a service for which they should be rewarded, year in, year out. On-demand vendors know they have to give users more.

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TOPICS: Tech Industry
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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.

Topic: Tech Industry

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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36 comments
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  • The question is Who owns the software?

    You imply the difficulty when you write:
    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.

    When the software buyer, under any arrangement, has invested in and come to rely on the software, then ceasing to make the software available becomes a threat.

    Being in possession of the software is reassuring, perhaps essential.
    Anton Philidor
    • RE: "The question is Who owns the software?"

      This is the problem with the software industry. They are not responsible for any actions, there's no government oversight if a problem occurs and then what? On top of all that, they want even more money? They are just going to price themselves out of the business.

      See if they had the same model as auto-makers that they would be doing much better. Like:

      1) Spending time and money to do reseach to improve their products and make them safer
      2) Giving you an option to extend a warranty on a purchase (A.K.A. a software warranty wouldn't be a bad idea, b/c it's optional you're not forcing it down someone's throat)
      3) Being responsible when there's a problem, the auto industry makes recalls on products and so forth to make sure the consumer is safe. A customer that dies in their product (a car) isn't good for business, why should software be any different?

      The point is, people want good services more then super-to-execellent software. I'd be happy with good software, but execellent service.

      If there is a industry that this is true for, it would be the cell phone market. You can pretty much buy and kind of cell phone, good or crappy, but if the network isn't good, it doesn't matter what kind of phone you have.

      ""You imply the difficulty when you write:
      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.

      When the software buyer, under any arrangement, has invested in and come to rely on the software, then ceasing to make the software available becomes a threat.

      Being in possession of the software is reassuring, perhaps essential.""
      ajapierce
      • People want innovative software...

        ... more than they want software that works.

        Software is rushed to market because customers' cost benefit analyses have told them that the advantage of using the new software exceeds the expense caused by flaws.

        If buyers wanted to wait until the software worked more reliably, then companies would not distribute until they are certain buyers will be satisfied. In essence the world waiting for the first service pack.

        But that's not what happens. Even service is less important than speed.
        Anton Philidor
        • Wrong

          people want software that meets 3 very simple and specific criteria.

          1. It works as designed. No BS just works.

          2. It's priced reasonably. $300.00 for some software is asinine.

          3. It's easy to use.

          That is what the average Joe and Mary PC user want. They really don't care about innovations and even if it is the most innovative thing since sliced bread, if it doesn't meet the 3 criteria above they don't care.

          Technophiles on the other hand... the 3 criteria are out the window. And if you look at the population breakdown, technophiles are a pretty small user base.
          Linux Advocate
          • Purchasing decisions for companies...

            ... are made by people. But my comments should more accurately have referred to corporations. How many individual home users buy a lot of expensive software?


            For indiviuals, "easy to use" is the same as "works as designed". Not many preconceptions.

            Worth noting also that individual users have no scruples about the definition of an operating system. Easy to use means does everything out of the box.
            And many individuals have only the software that came with the pc.
            Anton Philidor
          • Sorry Mr. Linux Advocate,

            that is what I desire, but if you really need an example that most people will not pay for software that just works, and is easy to use, you need look no farther than IBM's OS/2 Warp.

            Easy, fast, reliable, easy on memory,

            I;ll grant you that Microsoft's illegal licensing contracts for their DOS, which was extended with Windows was a big factor, and we have to fault the ?reporters? who fostered the vaporware, but it still boiled down to acceptance of substandard performance sold by so called reviewers.
            Update victim
        • Reliable Software

          The problem isn't that business customers don't want to wait for reliable software, the problem is that quantifying the reliability of software is very expensive.

          Furthermore, the fault of a problem in a piece of software isn't always clear cut. Modern enterprise applications have piles and piles of configuration information. Let's say the business installing the software configures something incorrectly, causing the application to throw an exception and display it to the user.

          The direct cause is the bad configuration setting, and is probably easy to fix (once it is found).

          But displaying an exception stack trace to the user is a HUGE no-no. Also, shouldn't the software be validating the configuration when it start? Or should it?

          What about customizations? Big corporations love customizing software. (Judging by actions, not lip service.)

          Have you ever tried to get budget for increasing the reliability of an application w/o adding functionality?

          The reason time-to-market is the most important factor is because it's the easiest one to measure.
          Erik1234
    • In Adobe v. Softman, the judge ruled that the purchaser of a

      copy of software owned that copy.

      The copyright only allowed the vendor to control the "FIRST SALE" of the copy.
      Update victim
      • That's one contract.

        In particular, when the software is available from a server, does the contract say that the software is in fact owned by the customer? Or is it owned by the service provider, to be removed when the contract ends?

        Not saying this problem cannot be solved. But it's definitely something to verify. Particularly when the service provider may have an expense caused by turning over a copy of the software to someone who has terminated a contract.

        Losing the software at the end of the contract is to me the ultimate lock-in.
        Anton Philidor
        • Interesting point, Anton

          In the Adobe v. Softman case, the software was "single use" and the question of server provided software did not come up in the case.

          With no references, my personal opinion, which is NOT legal advice, is that access to a server would have included a negotiated contract and that the terms of the contract would prevail.
          Update victim
      • which is...

        why most software is not sold, you merely purchase a "license" to use it. And if you read the "license agreement" you will see that the "Vendor" can revoke it at any given time or any previously stated time.
        I give you a very sound quote; [quote]"You might like to draw attention to the fundamentally different approach the court is taking in this case to the ruling of the ECJ in the Levi's v Tesco and Davidoff v A&G imports cases. In the latter Tesco argued that as there were no restrictions on the wholesaler from which they purchased the jeans (the exact opposite of an EULA) Levi's had given implied consent for anyone to resell their jeans wherever they saw fit. The ECJ ruled their was no implied consent and that Levi's were free to control the point of sale. This places considerable restraint on trade, generally an undesirable effect.

        Applying this to the Adobe v Softman case the ECJ would hold in the EU that not only was there not implied consent but that the explicit lack of consent specifically prevented the resale of Adobe products. This is a superficial examination as these decisions often turn on the precise facts of the case but regardless of the precise details this appears to represent a fundamental difference of approach.

        Unusually the pro-IP rights decision comes from the EU and the more liberal approach from the US.

        Chris Winter"[/quote]
        D-Ram
        • Sorry Chris, but

          in the US of A. the copyright law specifically, according to the court in this case, allows the vendor to control only the first sale. This referenced case was brought by Adobe for "license infringement". The judge held that when someone goes through the normal purchase transaction for a product, that the inclusion of a "license" statement inside the box does not constitute a license that overrides the sale. The new owner may do anything that he/she desires with their purchase except violate the copyright law by selling duplicates of the product.

          Softman did not sell multiple copies of the software. They only resold components of that which they had purchased after splitting out the various components.

          Essentially the judge in this case held that the purchase of a shrink wrapped box is exactly that, a purchase, and that the license inside the box was not enforceable because it was not agreed to by the purchaser before the purchase.

          This brings up the question of whether a "license" can be valid under any conditions if it is not negotiated and agreed upon beforehand. To my knowledge this has not been decided in the U.S.
          Update victim
          • You're right on target watcher

            Watcher, you're right on target. I've been researching this topic quite a bt lately because I used to be a computer equipment and software liquidator. I dealt in software some and sold some Macromedia Educational product on Ebay and a law firm claiming to represent Macromedia is threatening me now to settle out of court claiming if I don't Macromedia is prepared to try the case. I know others being similarly threatened. Most of them give in and settle after being convinced they've done something wrong when they haven't. I believe The Adobe v. Softman case Adobe was granted an injunction that was reversed in Softman v. Adobe. I was surpised when I argued my right to sell the software I was selling that the attorney quoted Softman v. Adobe in support of her position. When I looked it up, it said exactly the opposite of what she was claiming. Softman was unbundling bundled Adobe software and Softman successfully used the first sale defense. But, you're right, the issue hasn't been decided conclusively in the U.S. What I was doing is selling Macromedia Academic Version software on Ebay but I represented it accurately as Academic and not a commercial license. What they are claiming is that my distribution of Macromedia software was not authorized and therefore violates their exclusive right to distribute in section 106 of title 117. They claim they can control every point of distribution through the chain to the end user because all that is transferred is a license from entity to entity. However, it appears that the way things are going is that whether the software is licensed for use or sold is not going to be as big of a deciding factor as publishers think. I believe they're cutting their own throats attempting to over control the products. At the same time they are trying to say you aren't buying anything but paying royalties for use, they are also putting things in the licenses excusing themselves from liability for functionality of the product. They want to essentially license thmeselves the right to falsely advertise a product and have no liability. A number of cases exist where courts have ruled that no matter what the license says it's a sale because you are granted the right to prepetually use the product without a termination period and resellers pay a price and bear the liability of possible loss. If resellers can't sell the product or lose it in a fire, theft, etc., is the publisher going to give the reseller their money back? No. Does that mean they materially purchased something with value? Sure seems so. It is also clear in copyright law that what has the copyright and what is protected is the intellectual property not the medium on which it is contained. Therefore, even if the intellectual property is licensed the physical medium most definitely consitutes a sale and because without it you aren't going to be able to claim your right under the license, it has value that you own. Most licenses also grant you the right to sell or transfer your license rights to another as long as you include the physical items you received with the license. This is the big one that I'm just shaking my head at the audacity of this lawyer to attempt to extort money from me for unauthorized distribution. In numerous communication she restates that I agree I sold their product without authorization. I don't agree with that at all. She claims I am bound by the license agreement and the license agreement grants the right to sell or transfer and doesn't prevent this just because it's academic. Suspiciously, their license was changed since thetime I sold the product over a year ago which indicates the license as it was didn't allow them to enforce what they wanted. So, in my case it doesn't matter, either the EULA does apply to me or it doesn't, if it doesn't the first sale defense does. If it does apply to me, it authorizes me to sell the product.

            Part of the reason publishers want to control every point of distribution is to protect their product from price fluctuation do to supply and demand or market value. All products through all times have experienced these fluctuations. As a liquidator, I obtained software in liquidation loads all the time because when new versions came out or vendors had products they couldn't sell the publishers wouldn't take it back. Why wouldn't they take it back if all the received was royalties for use of a product and the existance of the product on the vendors shelf was proof no one was using that license? Vendors took the financial risk. Not only that but to be able to sell many publishers products by buying them directly or through their distributors, a reseller agreement was required that required certain volume levels of licenses to be purchased or they couldn't buy direct. If they ended up with more product than they needed, too bad. They were forced to liquidate it, then the publishers threaten the liquidators who pick it up and sell below market value with legal action. It's one of the biggest scams in the computer industry today and publishers have effectively included this activity "Piracy". It's piracy alright but they're the pirates. There is a piracy problem with people just making copies and using them, and companies making counterfeits. Publishers have quietly forced the sale of more licenses than are being used upon their distributors and labeled the liquidators who end up selling the excess a "piracy" problem. Legislators have bought into there pleas and cries for help as if they're being robbed blind. I guarantee the billions of dollars a year claimed to be lost through piracy is drastically overstated. Publishers themselves most likely force more software upon their distributors that never is installed on a machine than counterfeiters produce. Yet, they bundle this all together. Why can't anyone stop them? Because the only people they threaten with legal action are the small guys who can't afford to fight. When a lquidator is selling off say Windows licenses at sub-wholesale prices and those Windows bundles have a manufacturer name like Dell, HP or whoever stamped on the front of the bundle, who do you think violated an agreement? The computer manufacturer that is forced to take more software on allocation than they can use signed an agreement dictating how they can sell that product. I am certain that selling of pallets of it to liquidators isn't among the acceptable methods. As a liquidator I can tell you that's what happens. But, when a liquidator gets a publisher after them about selling their product, the publisher could easily go to the original point of distribution and file charges for the breach of contract. Why don't they do that? Well, because they make more money forcing the initial point of distribution to take more than they need, turning the other cheek when they sell the excess out the back door, then send their lawyers after the little guys who end up with the product and threaten legal action if they sell it. Then they finance big campaigns to make joe public believe the reason their software prices are going up is because of counterfeiters and "piracy" and label a number of legal actions as piracy. So, the poor guy who's out there trying to buy $1000 in legal software and gross $1200 after a weeks work has a legal team tell show up and explain how they're going to be tied up in court and legal fees for the next year if they don't not only back off, but pay them something out of court for them to go away. These guys are the freakin pirates.

            Big publishers really are going to cut themselves out of the market. Opensource products and smaller companies willing to provide software with reasonable agreements will take over. You want to make money in the computer industry now, invest in a company like RedHat. Professional companies that provide enterprise level platforms for opensource products and even free OS and development tools for the small guys and reasonably priced products for the big ones. They're going to be the ones that end up with the lions share of the market later. What do you think all most of your networking stuff is runnng on? routers, wireless devices, etc. The vast majority of these products are nothing more than scaled down tiny computers running on free operating systems. And you know what? You own that router. There's no question about copyright of the code that runs it. The manufacturer has customized it and protected it. You can't copy their code and use it somewhere else legally. This debate over buying or licensing software is a bogus debate. Initially it was to prevent renting, leasing and multiuser access to single license programs. Legislation has been enacted that protects publishers from that even if the product is a sale. There needs to be a real organization of small business people involved in the computer industry to fight this deception and companies like RedHat who have the most to gain by exposing the unethical practices of some of these publishers are some of the key companies who should consider funding these kinds of organizations.

            I know this post is long and went all over the spectrum on the licensing issue. But, the issue itself does. Talk to publishers and they'll have you believe it's set in stone the way they like it. Nothing could be farther from the truth. There have actually been very few cases filed but lots of threats and out of court settlements.
            30aonline
  • i love those kind of thing

    come on guys more stupid idea,( the comment is not ofr you Phil )

    great more stupid idea yes will pay for every use of something that crash all the time great ....not only we are getting hose by over priced crap.. that we have the pay until we are broke,like we are not getting ripe already ...

    excellent more reason to keep with linux great.
    gene pool need some chloride fast

    drink , drink , drink tomorow will be worst
    toxicfreak
    toxicfreak
    • dufus..

      this "direction" includes any software you may find to use with Linux (tho it be sparce) as well.
      D-Ram
  • How many times to pay for software

    I have some serious problems with companies wanting to host my work on their server. First of all, the security is a problem. Second, what happens if their server goes down or my ISP goes down? Third, I don't want to pay for the quality of software we get today. Most of it has many bugs in it and keeps crashing computers. I just wnat to get my business system working and then keep it working. I am not interested in the latest bells and whistles. It seems every time I update some software, it takes weeks to get things working again. So they want to charge me more for screwing up my business, NO THANKS.
    tqmiso9
  • It's about the money...

    It's about the money...less the passion for just weights and measures...and Corporate America is less righteous than it was yesterday...just look at the credit card companies and their interest rate rules...so who rules the heart of the lawmakers?...the heart of the hands of whose funds reach the lawmakers pockets...the one's we voted in...Change the law by changing lawmakers...follow that money trail...

    Focus!

    DB...
    BrookStone5
  • Some SasS Pricing Models

    Two types of software come to mind as a SasS that would work. One is the aforementioned Anitvirus/Antispyware category where the definitions must be continually updated. It adds value each time it is updated. The other is Tax software. It also needs to be modifed each year, adding value. I would subscribe to both of these types of software. The problem with Microsoft apps is that there are no incremental increases in value. They still aim for the big bang of a new release of software (Office 2003, Win XP, etc).
    I think a lot of people don't understand that the Norton Antivirus preloaded on their PC two years ago is not going to really guard them against new viruses. SasS would better guard their machines.
    DonG43
  • depends on pricing model

    You could have
    (1) buy the package use forever.
    (Support discontinues at some point)
    (2) Subscription model
    (3) pay per use model.

    I don't see why there would be a problem with any of the above. As long as the business model works (makes profit for host company), there is no problem.
    hipparchus2001
  • subscription service

    LAST SUMMER MY WONDERFUL BROTHER BOUGHT ME A BRAND NEW PUT TOGETHER COMPUTER, UNFORTUNATELY THE MOTHERBAORD WAS BAD TO START WITH. GETTING IT REBUILT WAS A COST I HAD TO BEAR. AFTER ALL WAS SAID AND DONE I PURCHASED THE REPAIR SHOPS ANTI-SPYWARE PROGRAM FOR AN ADDITIONAL $30 PLUS TAX. IT WASN'T UNTIL THE FIRST UPDATE WAS DOWNLOADED THAT I NOTICED IT ONLY HAD A ONE YEAR SUBSCRIPTION. UPDATES OR NOT I WANT TO BE TOLD UP FRONT THAT IT'S A SUBSCRIPTION SERVICE IN WRITING AT THE INITIAL PURCHASE OF THE SOFTWARE. AND ALSO TO BE TOLD STRAIGHT TO MY EAR THAT IT'S ONLY GOOD FOR ONE YEAR. IF IT'S NOT IN WRITING AND IF I WASN'T TOLD IT WAS SUBSCRIPTION UNTIL LONG AFTER THE PURCHASE OF THE SOFTWARE,I DON'T FEEL I'M UNDER ANY OBLIGATION TO "PURCHASE ANY EXTENSIONS TO THE SUBSCRIPTION. IT SEEMS TO ME IF THEY WANT ANY FUTURE BUSINESS FROM ME, BE HONEST AT THE START AND THEN KEEP YOUR WORD. BESIDES, MICROSOFT HAS A FREE VERSION THAT KINDA WORKS.SO IF MY DISC DOESN'T WORK AFTER JULY NEXT YEAR THERE ARE PLENTY OF FREE 30 DAY TRIALS TO TRY OUT EVERY MONTH TIL THEIR FACE TURNS BLUE WAITING FOR ME TO "RE-SUBSCRIBE".
    alandee4