Cloud applications: Do you really need another car payment?

Cloud applications: Do you really need another car payment?

Summary: Do you like this software-package-as-a-service model, or do you wish we'd return to the days when we bought what we bought and vendors stayed out of our wallets until we let them back in?

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TOPICS: Cloud
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Yesterday, ZDNet's Andrew Nusca reported that Adobe is going all in on the cloud, and ditching Creative Suite.

This is big. End-of-an-era big.

For most of the PC era, software was sold as packaged products. Before the internet (and, really, before nearly ubiquitous broadband), PC software (and Mac, too) was sold on disk — first on floppy, then CD, and eventually DVD.

In most cases, you didn't officially "own" the software. The "shrink wrap" agreement said that you were merely granted a license to use the software according to some very long, complex, and often incomprehensible terms, which often included things like the promise to make pancakes for the software maker every weekend for a decade and do laundry every other Wednesday.

Say "monthly fee" and imagine you're a product manager at Adobe or Microsoft. Doesn't it just make your toes curl up and make you breathe faster?

Once broadband came around, many software products that were sold in physical packages were also offered as downloads. Even so, the process was generally the same. You'd install the software, enter a license key, and be granted the right to use the application on one or sometimes two computers.

App stores changed the game a bit, but they still followed the "you buy it once" model. When you bought Angry Birds (OK, that's not a good example, because most of you have bought all the Angry Birds variations, on all their platforms). Let's try again.

When you bought a not-Angry Birds app, you bought it. You'd pay your $1 or $3, and it was yours to use. Sure, if you downloaded a game, you might get suckered into spending $100 on magic crystals, but that was your option (or obsession), not a requirement for continued use.

On the other side of the industry was the burgeoning new business model called software as a service (SaaS). Instead of buying a piece of software, you'd rent it — but you also didn't have to install it. It ran on the web.

Gmail is an SaaS product, a web application. As far back as 2005, I signed up for QuickBooks Online. I was moving my business a thousand miles from New Jersey to Florida, and the one thing I absolutely needed, even while all our office computers were in the moving truck, was our accounting data.

We signed up for QuickBooks Online, and in return for an ever gradually increasing monthly bill, we got access to our books anywhere, and I no longer had to maintain the accounting server. The online version was slower than the installed application version, so our bookkeeper regularly complained, but all I had to do was nod sympathetically. Because Intuit maintained the product, I didn't have to add an action item.

Since then, an entire, huge market of web applications have sprung up, many replacing the C:\Program Files and C:\Program Files (x86) installs we've all come to know and love so well.

Packaged software was being compressed on two sides. Well, actually, three. In addition to the app business and the SaaS business, those individual and small-fry developers that used to be called "shareware" developers simply continued their mode of distribution — which was to distribute their software online. The shareware folks used to limit their software or nag you incessantly, but really they were simply using online distribution — without all the cost of packaging.

So, once again, the big vendors — the Adobes and Microsofts of the world — were being pressured on three fronts. Mobile app stores were dragging down prices to ridiculously low levels, for relatively low-quality software. Small-fry shareware developers were distributing online without packaging cost. And SaaS vendors were selling entire suites of web-based products for a monthly fee.

Ooh. Did you feel that tingle? Say "monthly fee" and imagine you're a product manager at Adobe or Microsoft. Doesn't it just make your toes curl up and make you breathe faster?

Can you imagine? Instead of customers paying once every two or three or four years for a product, and then having to hawk upgrades to keep sales up, and instead of a measurable percentage of deadbeats cracking license generators and pirating the software, selling software as a service would mean a steady, constant, predictable income. Every. Single. Month.

The thing was, some applications couldn't really run well inside Java, JavaScript, Flash, HTML5, or whatever web-based tool you want to name. Some applications need the core horsepower of one or more local processor cores and compiled code. Photoshop is a good example. So is Excel and PowerPoint.

Sure, Google Docs implements a limited word processor and spreadsheet, but for all — all — the power of the Office applications, you need a local processing core and compiled code.

So, what Microsoft did was come out with Office 365. It's basically packaged software, sold as a monthly service. I signed up for it. Read My big email switch: Why I picked Office 365 over Google Apps.

For about $30 per month for my wife and I, we got our email and 10 licenses for Office. Since we each use three computers, it was somewhat less expensive than going out and buying individual copies of Office (and I need real PowerPoint for work, I can't use a simple slide-making clone).

But $30 per month is $360 per year, and if Office updates every two years or more (and, to be honest, two new features from PowerPoint 2010 to PowerPoint 2013 isn't really an upgrade), we'll really be spending quite a lot for software we once used to just buy, outright.

In the case of Office 365, the factor you might not know about is that we also get Microsoft's Exchange service, a service that we were already paying $20 per month for from another vendor. So, technically, we got the Office part of the puzzle for an extra $120 per year — not a half-bad deal.

Adobe just announced that it's taking this subscription model one step further. Adobe will no longer (after Creative Suite 6) sell stand-alone software. From now on, it's monthly fee or no software.

Before I go on, I need to make a disclosure. It's been a long time since I've bought Adobe's products. As the editor of Computing Unplugged, Connected Photographer, and host of DIY IT here on ZDNet, Adobe has provided me with copies of Adobe products since the first Creative Suite came out back in 2003 or thereabouts. Adobe was also kind enough to provide me with a subscription to Creative Cloud, so I can evaluate and show you how to get the most out of Adobe products for you here on DIY IT.

Even so, as a small business owner for so long, I can see how this change might be disturbing. While buying the full Master Collection was an expensive purchase, it was something a business owner or designer could do once, and then not buy again until cash flow would allow for it.

Of course, that was a big purchase. Amazon lists CS6 Master Collection for between $2,100 and $2,400, and even the student edition is nearly $1,000. That's not just a car payment. That's a crappy car.

That kind of cash is hard to come up with, where $40 to $50 per month is much easier. I imagine Adobe will tick off some of its more set-in-their-ways customers, but bring in a lot of people who want the full power of Adobe products, but who can't (or don't want to) come up with thousands of dollars.

More interesting, though, is the accounting question. When you bought a software product like Master Collection, you had to depreciate it over years. But if you buy a monthly service like Creative Cloud, you can expense that on a monthly basis.

So, some people will derive a benefit from the software-packages-as-a-service model, and others won't be happy about a new monthly bill.

The thing that's a little interesting and a little disturbing is how all these new monthly bills add up. When you add up the email application, the graphics design suite, the office suite, the cloud storage, the accounting web application, the group video chat application, and the desktop sharing service, each Windows and Mac desktop user will probably find themselves saddled with what amounts to another car payment.

So, here's the question: Do you really need another car payment? Do you like this software-package-as-a-service model (and, remember, most require you to sign up for a year at minimum), or do you wish we'd return to the days when we bought what we bought and vendors stayed out of our wallets until we let them back in?

Comment below.

Topic: Cloud

About

David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

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30 comments
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  • Life-as-a-Service

    Good points, David, but have you noticed all of the pay-as-you-go charges appearing on your collection of credit cards lately? It's not just software ... It's everything, including that car payment if you lease. Gym memberships, telecom services and other subscription fees add up after a while. In essence, we've gone beyond a society where everything is disposable to one in which we never own much to begin with.
    Njia1
    • Recurring billing. The business goldmine that never ends.

      Im amazed to see that writers are now just starting to write about some of the REAL reasoning behind the cloud computing push. There are two primary reasons for this big push to cloud based computing by the big companies.

      Firstly, it puts a real damper on software piracy. You shouldn’t have to think about that one too hard. Needless to say, how are you going to “steal” copies of cracked software if the software resides solely in the cloud and needs that connection to operate? Secondly, it puts a real end to all this “XP Forever” mindset of the public where they get a piece of software, that never wears out from use, and its “good enough” 7, 8, 9, 10 or more years down the road for many. The software companies, MS certainly included, look at the XP situation, and because its not that difficult to assess operating systems currently in use its living proof that there are vast hoards of the public who have bought various kinds of software, obviously operating systems included, that they are willing to make work for a decade or more.

      This is a horrible outcome for software companies. Built in obsolescence dosnt exist due to breakage from prolonged usage generally speaking, and if the software itself is truly at a point of maturity, many common folk who may have been prepared to make this purchase, and have no need for the newest and best of the best can live with the “good enough” performance of most kinds of software indefinitely. A company who counts on people pitching away their old software every 2-3 years max can be put into serious difficulties if it becomes a situation where that profit metric is thrown out the window because people in large numbers have zero need to upgrade to the latest and greatest for a very long time. Sure, professionals may have the want, the need and simply the desire to have the latest and greatest, but for many of the more common folk, they may purchase a moderately expensive piece of software once because its something they will use at home from time to time but they could never justify spending that kind of cash every couple of years.

      While the professional or business sales may often generate some half decent profit, just think of the millions on millions of non professional or non business people in the world and even if only a small percentage of those many many millions were to buy new upgraded versions of the software every 2 or three years it would help the profit bottom line immensely. With cloud based applications, the company that owns the software charging a monthly fee, even a small one, if that small monthly fee is kept running for years on years it does eventually improve profits over the very occasional purchasing public that may only invest in such a product once every 10 years or more. And better yet, it brings predictability to the equation because the company knows how many subscribers they have and they know full well it will take a cancellation to stop that gravy train from a subscriber to alter that. This is a much more secure situation than simply hoping that “X” number of people will buy the software this year because they didn’t buy the last few years.

      The whole cloud computing idea actually tends to suck in a large way for many in the general public. We are seeing this with our own eyes RIGHT NOW how the public WANTS to do things as time moves on. The general public has shown by their own actions, not words, but actions, as to how they intend to do things in the future, for not only home computing but many small businesses as well. Even some large businesses to a significant degree in many instances.

      The general public has literally, without question show by action the following:
      1. If the hardware isn’t breaking, the public will wait way way longer than in the past to replace the hardware.

      2. If the hardware is still up to the tasks they put it too, the public has no interest in upgrading the hardware to improve performance because they don’t really need an improvement in performance.

      3. If the operating system is working well enough that it isn’t creating problems and the user likes it, the user generally appears to have very little interest in upgrading the operating system, at least in the near term of a new release.

      4. People who may purchase software for their computer for occasional use, typically have little to no motivation to upgrade to the latest version, particularly the more expensive the purchase is. Where the software is still performing to a “good enough” standard then the situation could carry on indefinitely for all the user often cares.

      When you add all this up, its not hard to see how both the hardware and software side of the computer industry is impacted by lack of regular ongoing sales. The hardware and software are often intrinsically linked in the mind of the common user as well. This to such a degree that so long as both the software and hardware are performing to at least good enough standards a user often foresees no genuine benefit to upgrading, for example, Just the operating system or the hardware alone for improved performance because the common run of the mill user often thinks so much in terms of a computer simply being that it “is what it is”. Much like a toaster, and nobody ever thinks about putting new and improved elements in a toaster to improve the overall quality of the toasting experience so long as the toaster they have still makes pretty decent toast, even if better toast could be made.
      Cayble
  • A highly negative trend

    We still find Office 2010 to be perfectly adequate and plan to stick with it for the foreseeable future. Personally, I'd go with LibreOffice before I'd get on the 'monthly fees for life' treadmill. Software is becoming like any other consumer product in recent years, where they charge more but offer less. I'm going to opt out of this extortionate new business model as much as I possibly can.
    preilly2@...
  • Watch out

    This could become easily the same as Cable TV, cell service or any other utility. I remember when the cost of hooking up was very low, and you paid for what you used (water, power, TV, phone, etc.). But as they continued to raise the rates for the stuff in the pipes, everyone used less.

    So the model shifted to stuff that was added on. More fees and charges independent of what you actually used. So now that cheap water, cable or phone bill has very little water, TV or phone service on it. But it is higher will lots of loaded fees that can't be escaped. That is why, for example, phone service is getting more expensive despite the fact that the phone usage itself is dropping.

    The subscription software services will figure out the same thing. When we decide to pay the old rate and keep what we have instead of paying the upgrade fee to get the latest and greatest, it won't take long to have extra 'services' (read fees) show up that are impossible to get out of.

    Then someone will have an Jobs and Wozniak moment and figure out we need 'personal' computing back again. And history will repeat itself. But this time it will be Apple, Microsoft, Adobe, Google, and the rest that will be left behind. History repeating itself.
    jwspicer
    • What they really want is total control.

      They want you to buy into their ecosystem, use their products, store your data in their data ware houses and pay to have a connection, pay to use the warehouse, pay to use the tools and when its time to relax and take a break, pay to watch their movies or listen to their music and play their games. Then on top of that they want be able to warehouse YOUR usage statistics and sell that to advertisers who they will then present the advertisers ads to you.

      What do they want you to own and have control over? Not much. Some chinsey hardware thats completly useless without paying for all the above.

      What do they want you to NOT have control over? Everything and anything except your chinsey hardware.

      Will there be advantages for some? Sure. No question. You always want the latest and best software? Yes, for a monthly fee you got it. Maybe there is a very expensive peice of software you need to use once in a blue moon, no doubt there will be someone who will let you access that on the cloud for a one time user fee. Yes, there will be some advantages for some.

      Disadvantages when you have little to no choice? Ever seen Mr. "X" using the newest upgraded software of product "Y", and after a few minutes said, "Im not paying for that! I like the last version better!" ? Too bad. Its the latest and the greatest and your paying for it.

      And thats only where it starts.
      Cayble
  • Better

    I would rather pay R799 per year than pay R2000 once off. Atleast I know my software will always be up to date and what's more, you get more free stuff like Skype minutes, more storage on SkyDrive.
    Adobe was smart moving to software as a service. Yes it might seem expensive at $70 a month, but at least the cost of ownership is spread over years and you get the latest software when available.

    Windows should go the same route. But a bit cheaper, like $39 a year.
    Dreyer Smit
  • Adobe has lost me.

    Currently using CS5, may pick up CS6, then that will be it.
    IT_Fella
  • I think the real reason these companies are pushing so

    hard for a subscription model is because the products are so mature, there's not a whole lot more you can add to them. Seriously, what are the real major, to die for features from Office 2007 to the current one.

    Nope, I think the big selling point isn't going to be features, but security updates. These companies will basically tell you their products are such security pieces of junk that you'll NEED to spend $50 a month just to make sure they fix the swiss cheese they originally sold you. It's a con to make Bernie Madoff proud.
    baggins_z
  • Loss of Control

    As a company, the best part of Suite products was choosing what options I needed and when to upgrade. If the product upgrade didn't meet our needs, I could save that cash and invest it elsewhere. Now with SaaS products, I will no longer have that choice.

    Once I become dependent on the SaaS product, then they can tell me that they need another 5%, 10% or more to stay hooked with them. Should I feel that price is too high, then I can't stay where I'm at, I can't even use the data I've already built - I'm stuck using their product regardless of the price they charge. My only hope would be that another company would come along that would build a conversion product to their software. No guarantees that will happen and no guarantee I would have the full function of the program or data that I'm using.

    No thanks to SaaS. I'll look for something else.
    Erigon
  • No thanks

    I'm not looking for another "as a service". I have enough monthly recurring charges already. The last version of Office that I can fully own (well, license) is the last version I'm paying for. I don't do enough with Office to pay monthly, and I'm not about to start. Even if I have to eventually run Office 2010 in a Win7 virtual machine on a Windows 2015 operating system, that's what I'll do. I'm going to ride my old Office until the wheels fall off.
    bmgoodman
    • The company I work for is still using Office 2003.

      2003 does more than we need, (and we didn't need to retrain anyone to use the ribbon.)
      mlashinsky@...
  • I'm for paying once, not monthly

    Same sentiments as the others.
    bmeacham98@...
  • Only blind bloggers, the corrupt and the vendors want another car payment

    "This is big. End-of-an-era big."

    Can I give it you straight DG? You seem to have more intellect than your colleagues.
    I could buy a very nice DELL PC or laptop in the UK for say £450.
    I could buy 3 copies of Office 2010 for £90.
    I can buy 3TB disk drives for £100.

    I understand the benefits of cloud computing: I know I only use 1% of my very nice PC's CPU power and 1% of my fibre broadband throughput. I know cooling in a Siberian ice shelf datacentre is somewhat cheaper than my paltry home attempts. I know MSFT, AMZN admins have forgotten more about availability and security than I will ever know. I understand Moore's law and that networking bandwidth technology shot up by a factor of 10 a year or so back.

    SO *** *** **** would I want to buy:
    - a surface RT
    - an Office subscription
    - an ADOBE subscription
    - Windows 8
    - an iPad
    - a broadband subscription
    - ...?

    Why is there not an outcry on ZDNET against the insidious manoeuvring of the incumbent corporations (largely American) who are attempting to lock consumers and businesses into an increasing costly revenue model ... when costs should be reducing rapidly?

    Why? Because you guys are all stupid or corrupt. Sorry. No, I'm not sorry. I cannot quite express my contempt for the betrayal the ZDNET site fronts.
    But I won't stop trying.

    [Don't get me started on the taxation of Internet sales and the tax avoidance of American corporates with UK outlets.]
    jacksonjohn
    • It's not the end!

      You see in all the previous industrial revolutions the incumbent corporations went out of business or were marginalised.

      Just like the music industry, the big players are intent on maintaining their revenue streams in the face of technology reductions.

      Has ANYONE on ZDNET got the balls to even discuss the issue?
      jacksonjohn
      • Re: Has ANYONE on ZDNET got the balls

        No.

        After all, every tech journalist is happy to be bribed by these corporations in the form of free "experimental" licenses for everything they use, free review units etc.

        Those companies might not have mastered programming or production, but they have mastered bribing.
        danbi
    • By discuss I don't mean ...

      ... 'do we need another car payment' but ...

      ... you need to lobby to make sure this does not pass into law!
      You know: strident; determined; constant OPPOSITION.
      jacksonjohn
    • Just in case it wasn't clear

      For the $50 a month Adobe Creative Cloud subscription (I don't mind subscriptions - I don't like the amount!) I want:
      - a PC
      - a tablet
      - Office (WORD, EXCEL, PP)
      - Adobe software (maybe Lightroom and Photoshop)

      ... and I want the subscription rate to GO DOWN EVERY YEAR as you replace worn out stuff.
      jacksonjohn
  • As with everything

    Once people are faced with an avoidable expense, they will sit and think whether they really need those things. Many will discover they don't need Microsoft Office, or Adobe Creative Suite for what they do. So they will look for alternatives. The market will benefit.

    There will be always other vendors who will offer you different choice. Such is life.

    Remember: you always have choice.
    danbi
  • Two words...

    ...control and cash.

    Control: A subscription model greatly increases the control of the "seller" (and part of this is probably Adobe's and every other software vendor's ongoing battle against the pirates). Personally, I can live with a subscription model. I don't like it but if the price is acceptable and the software is something I need, I can tolerate it. But, the price is not acceptable.

    Cash: One thing that undoubtedly attracted Adobe to an all subscription model (although, for now, it appears that Lightroom and Elements will continue to be sold as perpetual license products) is the steady stream of revenue. It also appears that there is a cooked-in price increase for some users.

    For customers who use several of the Creative Suite applications, the subscription pricing can be a good deal. If your business bought the whole suite for $2400 and upgraded on the Adobe-standard two-year cycle you were paying $100 per month on average. That makes $50 a month a pretty good deal. If, on the other hand, you are a single application user like me (Photoshop), the $20 per month subscription is a doubling of the cost, assuming you upgrade with each new version ($199 upgrade every two years versus $480 for two years of subscription). If you upgraded every other version (as many of us amateurs do) the cost penalty is even higher.

    In short, Adobe seems determined to smooth out their cash flow, get a little extra cash out of its customers pockets, get a handle on piracy and, OBTW, jettison us cheapskate amateurs.

    Photoshop CS6 is the last Adobe product I will ever buy.
    codougd
    • get a handle on pirates

      I have always wondered about this. Just how is Adobe going to limit piracy? If they are going to implement yet more DRM junk, that will be eliminated just like now. This war is not possible to win. Adobe can lose everything, pirates -- nothing.

      There is only one way to fight piracy -- remove all the DRM junk and sell it cheap.
      danbi