NET(net), Inc.


Microsoft trying to convert you from perpetual to SaaS by jigordon
April 20, 2008, 9:32 am
Filed under: fees, license grant, metrics, risk, SaaS, Uncategorized

Well, as I predicted years before I started writing this blog, Microsoft is now trying to convert the average home user from a perpetual software license model to “software as a service” (Saas).

My knee-jerk reaction is that this isn’t going to be good for the average (any) user – business or consumer.  But let’s play it out and see what happens:

In the current, perpetual model, the average cost of Microsoft Office 2007 is $119 (per Amazon.com).  This is a one-time expense and allows you to install Office on two machines (desktop and laptop) so long as you only use it on one machine at any given moment in time.  The average person never buys any kind of support for this product unless it’s a pay-per-incident issue that is SO complex that they can’t get help with it from friends or strangers via the internet.  But you do get all of the updates to the current version of the product (ie: if you’re on version 2004, you’d get all updates to 2004, but not get version 2007).

Because it’s a perpetual license, you can use this product FOR EVER, without ever having to pay another fee to Microsoft unless you want to upgrade to their latest version (which, at the time I’m writing this, happens about every 3 years per platform, alternating between PC and Macintosh).  From a depreciation perspective, if you were going to buy the latest and greatest version of the product every three years, you would divide the purchase price by 3 to find out your annual cost of ownership:  $39.67, which works out to $0.108/day.  Not too bad for the product that supports all of your e-mail, writing, spreadsheet and presentation tasks.

We don’t yet have pricing available for Microsoft’s new online offering, called Albany, but we do know that they’re going to bundle in a few already-available-for-free services.

We also know that Google already offers something quite similar (GoogleDocs) for free.  If you’re already a GoogleDocs user versus a Microsoft Office user, you have made a choice to go with one or the other for a reason (most would say that they choose Microsoft for “guaranteed compatibility” and “support if needed” … and Google users say that they want “openness”, “freedom” and “collaboration ability”).  I highly doubt that Microsoft is going to offer their product/service for free… but I’ve been wrong before.

However, this really isn’t about Microsoft versus Google – it’s about a bigger issue of whether a conversion from Perpetual Licensing to SaaS is really a benefit to either the vendor or the consumer.  Perpetual software users like not having to upgrade every time the vendor releases a “fix.”  They like knowing that they don’t have to keep paying for maintenance when the product hasn’t really changed much over time.  They like having a one-time depreciable expense (if they’re business users).  Oh, and they like knowing that if the vendor ever goes out of business, it doesn’t matter too much, since the software is installed locally.

SaaS offers a level of convenience not found with perpetual products.  You are always on the latest version, always covered by support and you have less of an administrative headache since the product isn’t installed locally.  Sure, you have to have greater bandwidth (I’m guessing Microsoft will actually have you download a full version of the product which will simply “phone home” every time you double-click on the product to use it).  But you give up the ability to sever your ties with the vendor yet continue using the product.

I like the SaaS model for some situations – I use one for my contract management system, for example.  But for everyday, standard use products?  Especially those in millions of homes world-wide?  I’m not sure we’re there yet.  I’m REALLY concerned about the quality of service – and the constant communication connection (from a privacy perspective) of all of these phone-home events.

What do you think?

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