Purchase or Subscription?

People will write just about anything. “A new study shows…” is usually my first clue that whatever follows will contradict what has been said before, and more than likely comes from people whose main goal is attention. So when you read the news or blogs or listen to podcasts, information like this can be difficult to parse into the appropriate “true”, “maybe true”, “wishful thinking” or even “BS” piles.

Likewise, when you see trends, industry people want you to believe that the trends are coming from the users rather than the marketing departments of the vendors. “Everything is moving to subscription because that is what users want” is one of those statements I put in the BS pile. Much of that statement is true (some users want to subscription, and there is a trend toward subscription) and none of it is false, yet it fails to capture the real situation. Users are using subscription to access software because that is the only way some products are offered. So be careful when people say things that seem true, but are only misleading.

Software subscription is like automobile leasing. It’s a good idea for short term, or in special circumstances, but it’s not a good idea financially for general purpose tools. The bad ideas come in two flavors: long term economical and long term function. Leasing is a convenience, and you always wind up paying a premium for convenience. Long term subscription is generally a financial red flag. And functionally – well, you lose access to your software and your data at the end of the term. Just like when you turn in a car at the end of a lease, but at the end of a purchase, you get to keep the car, even if it’s out dated and broken down.

We also have to look at the real differences between purchase and subscription before we can pass judgment, though. Purchase often involves the obvious up front cost plus additional recurring maintenance payments. This is often confused with subscription. Maintenance covers support and updates while subscription grants you access for a period of time. Purchasing software gets you a tool that you can use on your own hardware, but maintenance keeps you up to date with the latest development and gives you access to support staff. Some groups try to use support as a substitute for training, but that’s not a great idea, it wastes a lot of time and resources and it annoys a lot of people for obvious reasons.

You can buy software without maintenance, and often that’s a great way to go if you have high level users who don’t really require a lot of support and the software already does what you need it to do. It’s a way to cheap out on software acquisition, but in some cases it makes the most sense.

Think of software subscription like subscribing to an old school magazine. It keeps coming as long as you keep paying except that you don’t get to go back and read the old copies. The idea of maintenance is usually included in subscription. And sometimes with subscription you’re getting more than just software, you’re also renting time and/or space on a server which may or may not belong to the company that developed the software. The relationships can and the responsibility for problems can be convoluted.

Software vendors try to make subscription seem like a good idea for you, and it may be, but in the end, it’s a better idea for them for several reasons:

1. Recurring revenue is something investors want to see. Big business is much more about investors than about customers. If you own stocks and buy software you understand both sides of the issue.
2. If cloud software is part of the deal, it is much cheaper for the developer to make a single version public, and only support that.
3. Distribution of physical CDs and/or download data is eliminated. Obvious cost and time savings here.
4. They don’t have so much support burden caused by user’s hardware and installation issues.
5. Developing and testing software on multiple platforms is vastly simplified.
6. Piracy is more easily controlled on the cloud. Not eliminated, just better controlled.

So the bulk of advantages from offering cloud software accrue to the vendor. When they tell you that you have asked for it, it’s not really true. They also like to pin things like this on “younger users”. That may or may not be true. Young people will believe what you tell them to believe. With all of these savings, the cost to the end user should be cheaper than perpetual licenses, but it never is.

The big advantage of software subscription for the customer is that you don’t have that upfront cost that you have with purchased software. With a lot of software that people who read this blog use, that upfront cost can be very significant (thousands of dollars). Skipping that kind of payment can lead a person to do and put up with a lot of things they ordinarily wouldn’t put up with.

Of course the big disadvantage of subscription is that you don’t get to use the software once you stop paying subscription. You may not have access to your data either. And of course if part of the deal is cloud software or cloud storage, you just need to understand what you’re getting into before you take the cheap bait. The smart thing to do is of course to export the data from the cloud in such a way that it can be accessed using free or perpetual license tools later on. The question really comes down to whether the upfront purchase price and maintenance combo is offset by the ongoing subscription and the data access constraints you will have to work with/around.

This is not to say that software subscriptions are evil or an inherently bad idea. They are simply one option that may or may not work for you in a particular situation. You need to read the fine print, read the reviews, access the online forums, and see what existing customers have to say about it. Be aware that not all software developers offer all options. Some are only subscription, some may be only upfront purchase. Doing your homework is important.