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Who Benefits From Subscription Software?

 May 7, 2015 No Comments »
Who Benefits From Subscription Software?
For every software-licensing model there is a hypothetical user who will benefit by paying less in the long term. When Adobe changed from outright software sales to a subscription-only approach, one of its claims to appease its customer base for the new lack of options was that many users would pay less in the long term. At Computerworld, Gregg Keizer notes that in the case of Microsoft’s Office 365 subscription service, “Moving a corporate customer from ‘transactional’ purchases of Office—the once-traditional practice of purchasing one-time, perpetual licenses that let workers use the suite as long as their firms want—to Office 365 rent-not-buy subscriptions results in almost a doubling of revenue for Microsoft.” But since one man’s revenue is another man’s cost, who really wins in this scenario?

Different Users, Different Models

Depending on the user’s situation and needs, different software-licensing approaches will yield different benefits. According to Scientific American’s David Pogue writing in 2013, “Adobe software will cost more [following the transition to the company’s ‘Creative Cloud’ subscription model—sometimes. In bygone days, you could buy Photoshop for $600….If you upgraded only once in five years, you’d have spent $800, compared with $1,200 for renting.” For long-term users, the surface benefits in terms of cost depend largely on how frequently they upgrade. “On the other hand,” added Pogue, “subscribing is a better deal for dabblers, those who can now rent Photoshop for $30 a month, starting and stopping as needed.”
Keizer cited Directions on Microsoft analyst Wes Miller, who said about organizations that decline to purchase each and every Office upgrade, “They’re like people who buy a car and run it until it rusts. They’re upgrading every other iteration, or even skipping two.” Keizer added, “Naturally, getting those customers to pay annual subscription fees results in more money for Microsoft.” Were that the end of the story, then subscription software could justly be viewed as just a plot to glean more money from the user base—particularly in the case of companies that like Adobe offer only the subscription model. But there’s more to it.

Continuous Upgrades and Mobility

A chief feature that companies offering subscription software often emphasize is regular updates with new features that would otherwise become available only with new full releases on a much longer cadence (often a year or more). In addition, subscription services may enable greater mobility, supporting use of the software remotely (i.e., away from a primary computing device) or on multiply device types. But like the different costs, the benefits of the subscription approach may only appeal to certain users.
For one thing, some software simply isn’t fit for anything other than a powerful desktop PC or workstation. Running Adobe Photoshop on your smartwatch (okay, smartphone, to be a little more realistic—but not much) is hardly of any value when the platform can’t handle the processing load and the display leaves little room to do work. Some software, however, may be amenable to a tablet or notebook, providing value to certain users.
In the case of feature upgrades, the benefit of regular improvements (or, in certain instances, “improvements”) may or may not be worth a cost premium from the subscription. A given user may, for example, prefer a static set of functions and features so as to avoid having to learn them. Such changes often constitute major complaints from users when purchasing new releases outright: they create a learning curve for something that may not deliver any real value. For some customers, especially those that only need certain base features, software upgrades may deliver almost no value whatsoever.

Other Considerations

On the provider side, subscription software means a steadier flow of income. A switch to subscription software, whether wholesale in the style of Adobe or as an option a la Microsoft, must also be accompanied by some other benefit for the provider. For instance, given Adobe’s share of the market for image- and video-editing software, there’s little reason to believe it switched to a subscription model just for the sole benefit of customers. It is getting something else out of the deal: likely, more revenue (in addition to steadier revenue) and possibly lower costs as well. Microsoft, judging from the testimony of its own representatives, does much better through its subscription model than through outright sales.
For users, subscriptions mean lower initial expenses as well as a fuller “try before you buy” (meaning “try before you invest too much”) period. Sure, there’s still a cost, but shelling out a couple hundred dollars to test Adobe software for a few months may make the software more palatable than a 30-day trial followed by a huge (thousands of dollars) price tag for a full purchase. In some cases, just that ability to avoid large outlays may balance greater costs in the long term (think the attitude of most people with regard to their credit cards).
Ideally for customers, whether corporate or consumer, the best option is a range of choices that enables selection of the best approach. Subscription services, thanks to their additional benefits beyond software purchased outright, may offer a better value—or they may not. Either way, providers will pursue the approach that they think will maximize their profitability, and understandably so. In such cases, however, markets with limited competition mean that many users may lose access to certain options.

In the End

One factor that is difficult to quantify in cost comparisons but is worth considering is what happens when the user ends a subscription. Consider, for instance, Adobe Photoshop. Depending on frequency of updates, the value of peripheral features and so on, an outright purchase might have been better than a subscription over a given timespan—or the reverse may be true. Either way, however, once that timespan ends, the subscription approach leaves the user with absolutely nothing. The user who purchased the software outright still has the software. In other words, there’s some extra value there, particularly if the user perhaps wishes to continue doing some lower-level tasks on a familiar platform, that the subscriber loses if the subscription reaches the point of no longer being worth the price. Again, however, it all depends on what the user needs from the software.


It’s only natural to expect that companies will offer subscription software if they think they can make more money off of it. And in cases where customers have few alternatives if they object, such as with Adobe, so much the better. But the provider is looking at the situation from the perspective of a broad user base rather than one specific situation that demands an optimal solution. On the customer side, however, the choice can be difficult. One approach may prove more valuable than another, or the differences may be too small to worry about. The costs of a poor choice can accrue quickly for companies that purchase many licenses, however, so this matter is no academic exercise.