Adobe dared what other software companies have only dabbled in doing: converting their entire, hugely popular software library into a rental-only commodity. Why do software companies aspire to this model? As you might suspect, users of expensive software packages like Adobe’s Creative Suite or Microsoft’s Office products are able to enjoy multiple years of use from the software before reluctantly upgrading, a consumer trend that bodes ill for any software manufacturer bottom line. The solution: make your highly desirable products only available for rent, or in software parlance: “subscription-based”, guaranteeing you a regular income that will make shareholders dance with glee. While this move has angered a large number of Adobe users, the software company was able to pull the plug on ownership because of the virtual stranglehold it has on this particular category of software, especially its flagship products Photoshop, Illustrator and Lightroom, for which there is virtually no competition its users are willing to consider.
What this means for you:
Adobe’s success (or failure) will determine how other companies proceed. Microsoft already has an extensive subscription-based offering of its productivity suite, which can be rented for what most in the business world consider to be a fair price, especially seeing as how critical Office is in daily business, but “rentals” are only a fraction of its overall sales, which still come through more traditional licensing channels. Annual licensing and maintenance has long been an accepted and expected revenue generator on the enterprise side, a means to bolster profits from an ownership model that came from lengthy software development cycles that are growing shorter and shorter every year. Adobe’s justification behind the subscription model maintains that subscribers will be able to enjoy continuous improvement to and expansion of their products. The question remains, however, whether business is ready for applications and platforms that continually change. While new features and improvements are always welcome, the constant change also present bugs, security holes and training challenges that are definitely not covered by the subscription. Where before companies could control the rate at which their critical business software was changed, now they may have to join a race in which the finish line is constantly moved away from the partipants.
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If you’ve been salivating at the prospect of upgrading to Microsoft Office’s latest iteration – 2013 – then your wait is officially over. Multiple SKU’s of Microsoft’s productivity platform will become officially available on Jan 29. Most importantly, Microsoft is now making the Office suite available to be “rented” via the Office365 Home Premium package. This subscription-based service will allow the main Office apps (Word, Excel, PowerPoint, OneNote, Outlook, Access, and Publisher) to be installed on up to 5 computers on your local network (Windows or Mac) for $99/year.
What this means for you:
Up until the arrival of Office365, most organizations couldn’t afford (or didn’t want to afford) an enterprise license for Microsoft products with the Sofware Assurance premium which basically guaranteed upgrades for their entire license base over a certain number of years. Instead they purchased what is known as a “perpetual use” license: it allowed the licensee to use the version of Microsoft software they purchased for as long as the software remains viable. This has manifested as many, many organizations running much older versions of Office dating back 10 or more years, and still quite happily getting work done without paying a single additional dime to Microsoft.
Microsoft, in an effort to keep the coffers full and users happy in all categories, has commoditized Office with this subscription service for everyone, allowing companies and families with tight budgets to remain competitive without breaking the bank. Office has been the predominant productivity package for business, and now with affordable pricing for entire households, Microsoft hopes to further extend and cement its grasp throughout the consumer market as well. Depending on where you stand in the industry, this is not always necessarily a bad thing. Broad standardization will lighten support burdens everywhere. On the flipside, crushing the competition might lead to stagnation in innovation, and as we all know, it’s been a long, long time since anyone every looked at a new version of Office with anything other than trepidation.