Slashdot Mirror
Corporate America Wary of Subscription Software
medical_geek writes: "According to this
article
on cio.com,
MS's subscription service is failing in the business world. I guess
that personal users are not the only group that balks at paying a yearly
fee for software. My question is have you at your job bit the bullet
and signed up as an early adopter, or are you rolling the dice and seeing
if this experiment fails?" This article focuses only on Microsoft, but the same analysis probably explains why ASPs haven't taken off like they were supposed to, either.
It'll only be when the quality of the software is up to scratch that people will start thinking about its price. In the end, the total cost of ownership of software is much larger than the licence fee: putting in fixes after deployment is terribly expensive.
"Well, put a stake in my heart and drag me into sunlight."
My company is about to do a rollout to a company of about 50 users. We are telling them to go for Win2k rather than XP, purely because of all the driver problems we are having on our test systems.
They want a fast rollout, with minimum hassles.
Windows XP cant offer that right now.
Stability: it's better than the WIN3.11 that a lot of users have now
Software Price: it's a LOT cheaper than what MS is charging for WIN ME etc. Subscription in itself is not really a problem (we have a few mainframes and IBM's software is mostly subscription based, but that usually includes upgrades and consultancy).
Total cost of ownership: It can be run on 'slower' hardware than what's needed for the newer flavors of WIN. It's also upgraded less frequently (upgrading 1500 PC's is a lot of work and therefor expensive).
PS: We also checked out Linux. The (sadly enough) only reason not to go for that was the (at that time) lack of support for MS-fileformats.
I have a photographic memory for numbers. I know almost a hundred of them.
My company is buying NT and W2000 licenses while they last to give to our customers so that they do not get stuck. Many people for security reasons cannot have access to the internet. Furthermore, the fact that only now after years of crap Microsoft is realizing they sell Swiss cheese is a reason not to trust XP & Co.
And just how is this different from what RH is doing with their "Entitlement" plan? Smaller scale, granted, less expensive, also granted, but it still sucks to have to pay for timely updates and patches. Even more so when these are security updates! Yes yes you may still get the patches of your own accord, but to me this is just another way of RH making sure they get at least $20 dollars out of every RH install. No more downloading one copy of RH and dumping it on dozens of boxen. Now if you wanna play, you have to pay each and every time whether in the form of another copy of the distro or the godforsaken "Entitlements" program. Still better than SuSE not even providing the option of an official and fully functional iso image. On the other, good for the Linux companies that believe enough in their product that they are not going to simply give it all away. Expect to see more of this as (if) broadband connections become of the norm.
At the moment with the economy on a backstep Microsoft has chosen the wromg time to start the push to subscription based software. It does not need a PHD to work out that the fundamental reason for this is to increase the revenue stream from its users. (There is a nice analogy here with pushers and drug users here but i'll leave it for now)
However, there is a major bonus for the open source movement as commercial interests are now looking to reduce their exposure to MS. Consequently, Linux is gaining more credibility as an alterantive O/S within the mainstream business markets.
Frankly, I'm all for MS pushing the subscription based model as hard and as fast as possible but I don't own any MS stock and I do care about the open source movement.
Just a thought.. but Linux Just Makes Sense more and more now-a-days, even if in some cases, it is less capable than the Microsoft alternative.
eBay is one of the most successful ASPs on the Internet. Sellers seem to have no problem paying a per-auction fee to eBay for hosting the auction application. You can imagine an alternative where everone paid $10 for an eBay application that sat on their Windows desktop and did a P2P search of current auctions by communicting Gnutella-style with the other eBay applications. It would suck. The ASP version kicks its ass any day of the week.
Similarlly, I used to work for a company with an ASP remote access application. To circumvent firewalls that only allow outbound connections, the company routes all connections through their servers; there's no other way to do it if you want to support connections where both endpoints are firewalled. Hence, ASP. It's easy for me to justify paying a monthly fee to use this service because the application demands it. I have to use their servers. (The company includes free support and free upgrades with the subscription fee, too, which makes it rather more attractive than Microsoft's licensing scheme.)
As for ASP MS Office... At this point, my reaction is, "What's the point?" In the absence of ubiquitous thin-client computing, I can't see at all why I'd want to pay for a subscription. There's no value in an ASP model for lots of applications, include most of Microsoft's (with obvious exceptions like Hotmail).
ASPs didn't fail. They just succeeded where it was logical for them to succeed.
You can't grow your market. If you can't grow your market, then how do you increase your revenues? The only way is to change your pricing structure. Since you are a monopoly everyone has to cough up (or at least that's what MS thought).
Unfortunately for MS it seems to be inducing people to look for alternative ways of reducing the money they pay. This is the time to do some evangalisation folks!
At my place of business, we develop VB applications (no flames please) that we use internally to control inventory, and to track units that we produce, as well as write test software to well, test our product before it ships. Besides running windows 98/NT/2000, we've decided to start converting our software over to Linux, writing in pure C, and using MySQL for databases. OK, I know this seems OT so far, but my point here is that we are doing all of this to avoid using XP and any other upcoming versions of MS windows. We have decided that we will do our best to make sure that 2000 is the last version of windows that we will ever buy, at least in our department. We've already been using Linux on servers within our department for about a year, using apache to run a simple intranet server, and have samba up doing file and print services. Since some of the brass have found out about our 'secret' of having high availability linux servers, they were intrigued and like the direction we've taken thus far. Hopefully we can avoid XP all together, and write software that can potentially be useful forever, by writing it for an OSS platform.
------
Random, useless fact: I type in startx entirely with my left hand.
...I'm using a company machine with WinNT 4.0 SP6a. With a "Windows(R) 2000 Professional 1-2 CPU" sticker on the side. We downgraded it, and for a very good reason.
It does everything that I need to do my job. It does nothing that I don't need. The issues are known. It doesn't require any more patching because it ain't broke, or it's broke in known and acceptable ways. It doesn't require our IT guys to have to ask what version of what OS I'm running, nor to hunt out the right ghost image for that combination of hardware and OS. It can be ghost installed or copied, which is vital for replicating software builds.
Windows 2000 would be a barely acceptable substitute. There are far too many unknowns with WinXP, plus it has that habit of knowing better than you what drivers you really want to use (I need to test beta drivers, for god's sake, give me an "I know what I'm doing" button!).
Windows.NET would be absolutely, utterly unworkable in a business environment, because neither I, nor our IT guys would know what exactly was on the machine, nor would it be possible to replicate that at a later date to reproduce a build exactly.
We cannot and will not upgrade to .NET. Ever. As application support for NT dies away at the same time as Linux support grows, it's looking like a better (corporate!) proposition every day, and not just in the server room.
If you were blocking sigs, you wouldn't have to read this.
An ISP I used to work for tried to sell MSExchange WEB ASP services and it was a huge flop. Of course it didn't help that our sales force SUCKED. Guess that's why they don't exist anymore.
A subscription model won't let you do this (without a heavily software modification by crackers).
My money is on the crackers winning. To my knowledge, very few games have _not_ been cracked in some measure. Those which are most resilient are those which require a login to a 'game server' (Diablo II battle net or Half life online). Even then, unless you want to play online, it's quite possible to get them going.
Which looks to be the way things are going I suppose, but it'll really suck to have to run a net connection _just_ to be able to use their application.
Now there's a thought. 'fake' authentication servers? Is that even possible?
Time will tell at a guess. My money though, is on people just sticking with the 'best' version of a product which doesn't require the upgrade.
Even Eric S. Raymond agrees with MS on this one :
"It is also worth noting that the manufacturing delusion encourages price structures that are pathologically out of line with the actual breakdown of development costs. If (as is generally accepted) over 75% of a typical software project's life-cycle costs will be in maintenance and debugging and extensions, then the common price policy of charging a high fixed purchase price and relatively low or zero support fees is bound to lead to results that serve all parties poorly.
Consumers lose because, even though software is a service industry, the incentives in the factory model all cut against a vendor's offering competent service. If the vendor's money comes from selling bits, most effort will go to making bits and shoving them out the door; the help desk, not a profit center, will become a dumping ground for the least effective and get only enough resources to avoid actively alienating a critical number of customers." - Eric S. Raymond
This is taken from The Magic Cauldron
I work for an ASP in the financial sector located outside of Philadelphia. I'd like to say for the record that not only are we surviving the dot-com crash, but we are doing quite well.
Even through the September 11th disaster and financial woes that followed, our firm thrived and actually had sales INCREASE during that time.
The trick to us being a successful ASP is that we have an extremely driven sales department, and a very adaptable product that can be modified to suit any user's needs. We fill a niche with industry knowledge and expertise that is quite valuable to our customers.
Please don't lump companies like mine in with Dr. Koop dot COM!
Many successful software companies charge support fees in addition to a flat fee for the software itself. Sometimes the support contract is mandatory to obtaining the software. This really amounts to the same thing as M$'s deal, but the way Microsoft does it has more of an unsavory feel, doesn't it?
Why is that? Conceptually, we know that any given piece of software is only going to last a few years (without an upgrade) before it becomes irrelevant. Wouldn't it be easier to just pay an annual fee and always get the latest and greatest without having to worry about it?
But, I guess it is the idea of personal choice, and the fact that it's cheaper only if you were going to get every single upgrade with no break in between.
Perhaps they should just return to sold software and support contracts.
I'm an IT Manager, and also opted not to take the Software Insurance offer. For one it meant that we'd have upgrade (or at least buy the licenses) all our MS products to latest version. All the NT + Exchange + SQL CALs, and then Windows + Office + Project... It adds up quickly.
... :-) But if you don't take software assurance then you can't just upgrade down the line. You have to pay the full purchase price. Which is all fine and dandy, except that they didn't write the product from scratch, they built it on top of older versions. And you already paid them for the intellectual property in the previous versions, so why do it again? Upgrade in the older, normal sense is much more fair, since you only pay them for the added value... when you need it.
But my main point that I wanted to make is that it's just plain unfair. Microsoft want you to pay them even when you *don't* want the latest and greatest. (And 95% can life without it... If some people think StarOffice 5.2 is good enough
Pardon the rant.
Because microsoft measures value based on increasing revenues each year, maximizing share holder value means shorten the product cycle from 2-4 years to 1 year. From a share holder perspective, it's great. A rapid product cycle is a good thing for share holders because it means you're getting more repeat business more frequently.
From a user perspective, a certain level of product stability is necessary to create a sense of value and reliability. If the product cycles at a faster rate the customer is comfortable with, the company begins to loose business. Think of a can opener. What if every can opener was only good for 10 uses and it would break. No one would buy can goods or can openers. Food manufacturers would use some other container, like a jar instead of cans. It doesn't matter if the can opener is only 2.00. No one wants to buy a new can opener every week.
Microsoft is not immuned to the same market principles. Making a product too good or really poor isn't good for the company, consumers or the economy. Back in the 80's Honda found a good way to make bearings in such a way that they would last 30-50 years. Well guess what. Honda stopped using them in cars because they were too good. Using those bearings in cars made them way too reliable and was hurting replacement parts sales. There has to be some middle ground where corporate and consumer needs are in balance.
Microsoft may or may not realize it before it is too late.
I'm not talking about servers, I'm talking about desktops. Desktops get moved around, recycled in different roles, and there's a lot of them, not all of which can run 2K let alone XP or .NET.
Managing 2 OS's, let alone 3 or 4 would increase the workload (and cost to us) of our IT guys. And rolling back an existing install is not the point. The point is that when a bit of my box fries (which it's done once), with half an hour I'm using another box from the same manufacturer (faster CPU, but same components) with a ghost of exactly the install of NT4 6a and apps that I was using ('cause I wasn't dumb enough to screw with my old box), and I and the IT guys know what's on it, and the box doesn't then try and second guess me and upgrade itself. Ever. If I can't get a recycled box with the same hardware, I can get a mostly equivelant (but known) ghost image on a newer box, or (worst case) we can start with a new box, rip whatever it comes pre-installed with, install it up to a known state that's not far off a ghost image in terms of repeatability.
Yes, we can do that with 2K. We can do it with XP - if we're careful. But with .NET and son of .NET, it's going to get harder and harder. I'm not saying we can't do it, I'm saying that it may become more trouble than it's worth, and it will push us into using alternatives.
I should make it clear that I develop and maintain telecomms software that's been in the field for years. When I have to fix a bug in software that was built 5 years ago, I need to replicate the original build environment exactly, no surprises, no enhancements. I previously worked in the nuclear industry, where this was an absolute requirement. We had 20 year old machines in storage that had to be maintained to replicate builds, and a firesafe packed full of complete OS and application tars to wipe these systems and put them in a known state.
Our problem is not one of administrating and updating a network, it's of stopping it being updated. That's a very real need for some developers.
If you were blocking sigs, you wouldn't have to read this.
My wife works for a large investment house. And they have not bought into this scheme. They are now thinking about deploying LINUX. This is done for two reasons:
1) Put Microsoft in its place
2) Test LINUX and see if it actually is usable.
I think now is a good time to show how good LINUX is. Corporations have the ear of the other software vendors.
Interesting that Microsoft always said they would never make the mistake that other corporations did when they got large. True they did not, but they are making their own mistake. It is not arrogance, but "Microsoft rightness". I bet this will make interesting business case in the future.
"You can't make a race horse of a pig"
"No," said Samuel, "but you can make very fast pig"
We're jumping head-first into Microsoft products here, at a non-profit operation. Office XP alone will cost us several tens of thousands of dollars (US) per year. All this while we're being told there's no money. All this despite the fact that I had prepared an alternate path that relied on open source and free (as in beer) software which met all of our needs. Why? Because the executive committee, or at least the only one on it with a backbone, decided that anything that is downloaded is bad. Never mind the fact that I countered that by saying that all of the software required could be acquired without download. Unfortunately, there's still a mindset among the people who write the cheques that Microsoft is the best option. So they'll shell out $50,000 per for Office, while their underpaid staff continue to leave to work for better managed companies.
This is the second time since I started working here that management hasn't followed my recommendations. The first time was a disaster. Hmmm, let's peer into my crystal ball...
Someone should tell the antivirus companies that subscription doesn't work.
It completely pisses me off that now I have to essentially "repurchase" my anti-virus software every year or two in order to keep getting auto updates. (Yes, I can manually update the AV data files, but that's a pain in the ass in a multi-user environment of any reasonable size.)
Remember when you bought your AV software once and got updates for ever?
load "windows7"
And just three months ago Enron was the largest most successful energy company in America, at least according to their financials. Accounting is often the black magic used to decieve investors and the government alike.
Point 2: ASP software needs to use a reasonable amount of bandwidth (no extraneous images, etc.). This is ilke saying "most offices have hard drives that are too small to handle the latest release of office". If ASP software offers enough value, it will be worth businesses' while to upgrade their connectivity.
Point 3: This is also not specific to ASP software. I've used a lot of un-customizable software, both ASP and non-asp.
Point 4: Your concern here was addressed by the poster whom you replied to. There were a lot of start-up ASP's that went under and caused people to worry about confidentiality, etc. However, this is not a flaw of the ASP model, merely an aspect of the risk involved with doing business with a small (newly established) company.
The no-brainer is getting caught up in criticizing the "internet bubble" rather than looking at the ASP model as a good way to solve many of the problems associated with traditional software distribution and licensing.
Amazing magic tricks
If you were a corporate exec: which would you rather do?
(A): Give up control of mission critical services to a third party thats only interest is to increase the bottom line.
or
(B): Keep it in-house, so you can keep your eyes on it.
Most corporations realize that it isn't wise to let important company services be controled by an outsider.
I work for a fortune 500, whom will remain unnammed.[But I will say we make power tools, lots, and everyone has heard of us.]
.. because this was the first time they heard we were going to be PAYING a subscription fee annualy!]
.. they actually started to consider an open source solution. [the 2 camps are digging trenches now.]
.. "do you want to pay 200k or 700k" and totally ignoring the new policy where you have to pay an annual fee on NT which was written in 1993.
.. and seemed desperate to me .. now i know why .. we would have been a fairly well branded chip to show people that this was how big business does things .
We are very in bed with MS software wise, much to my chagrin.
A few months ago MicroSoft was in pitching to us that we should upgrade from NT4 to WIN2k for our network & desktop machines.
The sales guy's pitch was that if we did it *NOW* it would only cost us $200k more a year on our annual subscription fees, if we did it now - or $700k more a year if we waitied till our licence expired. [At which point 1/2 the people in the room blinked
Keeping in mind how in LOVE with MS our support team is
The scarey part is that MS was using a simple drop close
The guy was REALLY pushy
--Ne auderis delere orbem rigidum meum, non erravi pernicose!
"Not to be off topic - but this is illegal. "
You can downgrade licenses purchased under a volume license agreement, but yep not OEM licenses.
"I seen a lot of posts that state NT4 is running fine for that web site (its much easier to secure - that's why people are still using it) "
Well that's certainly not true. Windows 2000 is much better as a web server and far easier to secure.
Furthermore, NT 4.0 goes on the unsupported list this year.
Basically, we're a java/Linux shop and Windows installs are regarded as a necessary evil. There are some things that we have to do that for both licensing and technical reasons (the media player HAS to be part of the operating system, right?) need to be run on windows. But every windows install is an ongoing liability. They're a pain to build and configure, unreliable, configurations differ for no apparent reason, managing large numbers of rackmounts is a nightmare, etc. etc. You've heard it all before. But the advent of XP fills us with dread. The question is not whether we'll adopt it, but whether this one will seriously damage the company.
It kind of feels like the living in Sarajevo and being shelled by the troops up on the hill. Incoming! Licensing bombs have hit the spiders, sarge! Oh no! More breakage in the media crackers! Can we repair it or do we have to abandon the codec? I mean, it's a wintel world out there, and ours is a volume business, and if we reimplement stuff ourselves we'll be attacked by hordes of mutant ninja lawyers.
It's not like we can ignore it. Bill farts, we run for cover. We are small, the death star is merciless.
It provides a form of stability for the supplier (Microsoft) and the consumer (in this case a corporation). Microsoft can then better plan it's economic future and budget outlays on the basis of return from uncompleted contracts, which provides reassurance to the stockholders. This is a fairly common business practice for all companies: sell a long-term contract to supply a product at a fixed price.
Come to think of it, this may be part of the problem with the perception of Linux. The Linux OS and associated tools are in a state of constant change. This is sound from a software evolution point of view: bugs get removed, the software get stronger. However, there is no company backing Linux - one can't say with absolute certainty that a particular bug will be fixed or a feature added because Linux development is not as market-driven as Windows.
Business understands market-driven software. If you throw enough money at the problem, it will be fixed or go away (or in some businesses, be taken for a long walk off a short pier; I digress from my digression). That guarantee doesn't hold with Linux in a way that business can understand.
A brave business can buy long term support contracts from RedHat and several others, but business is generally conservative and not as comfortable with change as the individual. It wants the stability of Microsoft and thus is willing to buy into long-term contracts that restrict change.
To celebrate the occasion of my 1000th post, I will post no more forever on Slashdot. Goodbye.