Software Subscriptions: Way of the Future or Money Making Tactic?

When Microsoft unveiled their new Office suite earlier this year, they made significant changes to their Microsoft Office offerings.They eliminated all multi-license packs and  unveiled their new Microsoft 365 subscription offering.  Microsoft also increased the price of the single license purchase a fair amount by about $30 and can only be installed on a single machine. Finally, Office is no longer available on DVD but instead only as product key requiring users to download the trial from the the internet to install and activate with their product code.

Although Microsoft Office 365 sounds much more expensive $100 per year, it has some added value over traditional versions of Office. First, 365 can be installed on up to 5 computer and/or tablets Macs, PCs, and tablets, right now only Microsoft Surface tablet, but there is talk of iOS and Android versions coming soon. This is exciting for those who may have both Mac and Windows machines in their household or business because that subscription will cover both operating systems which previously would require two separate purchases.  The Home and Student version of 365 also includes Outlook, Publisher and Access while, the single license  of Home and Student only has Word, Excel, PowerPoint and Onenote. Probably the biggest advantage to the subscription is that subscribers get the newest version of Office at no additional charge which usually would be $100 at least to upgrade. As an added bonuses, Office 365 Subscribers get 60 minutes of Skype credit and 20 GB of Skydrive storage space for the primary users.

Microsoft isn’t alone in their subscription efforts, Adobe offers their Creative Suite as a monthly subscription in their Creative Cloud. This is great for the brief projects where someone may need Photoshop or After Effects for a couple months only, so instead of paying for over $1,000 for the Creative suite, they could just pay for the few months they need and save hundreds of dollars.  It seems like many more expensive applications are now moving towards a subscription model instead of a one-time purchase. This is beneficial, in that all the updates are free which, in high-end professional applications like Adobe Creative Suite cost hundred if not thousands of dollars to upgrade normally. However, many consumers might be caught in the sticker-shock of having to pay every month or every year as long as they want to use that software, which of course in the case of Microsoft Office is forever. However for those who want to buy a piece of software and keep it as long as possible it will seem much more expensive than a one-time purchase leaving consumers skeptical.

Personally, I was very skeptical of the Microsoft 365 subscription model thinking it was a just a way for Microsoft to make more money off the users, taking advantage of their practical monopoly over the Office Suite market. I have now realized that there is a value in this subscription model, forget about all the additional applications you may or may not use, the Skype credit and the Skydrive storage space, upgrading Microsoft Office typically costs around $100 per computer, of course it cost less when they offered Family packs for 3 computers. But now, with 365 for that $100 per year, you are getting 5 licenses for Mac or Windows, although Mac users are still getting Office 2011, but that includes any updates as long as the subscription is active, so when they release the next version for Mac, the update is included. Microsoft no longer has discounted upgrade pricing, so getting the newest version of Office requires re-purchasing Office all over again.  Of course many users don’t upgrade Office every time there is an upgrade.

This subscription model is also known as software as a service (SaS) and while it is new in the desktop software world, it is the norm in cloud computing. Take Google apps for example, for businesses to use the Google Apps suite, it is $5 per user per month, there is no one time purchase, it’s a service that is paid for as long as it needs to be used. Dropbox and other cloud-storage services are another great example, while they offer a certain amount of storage for free, if users need more storage, it is a monthly or annual fee as long as they want the premium service.

Office 365 also includes a cloud service called “Office on Demand” which allows you to “stream” Microsoft Office on any Internet connected Windows PC, sadly this is not yet available on Macs. So for those who may travel and have to use computers other than their own that may or may not have Office installed, 365 subscribers can simply use Office in their web browser without having to install it. The cloud is definitely going to be a big part of future application development maybe even over taking native desktop applications one day, but how many services will people pay for before they decide they are spending too much money each year on subscriptions?

My other big question was what about the App Store ecosystem that began on mobile devices and has now spread to our desktop operating systems? App Stores are the easiest way to buy and maintain our software collections in my opinion. What happens if the software ecosystem moves into more subscription-based and less one-time purchases? Well the easy answer is nothing, in fact, despite my initial concerns, I realized subscriptions might be beneficial to App Store users. Here’s why: users could download the free, limited version of the software and then if they want to get the full version they can subscribe using an in-app purchase every year or whatever the term of the subscription is. App stores will probably need to add some features to make this easier for the consumer and developers but that would give the added convience of the App Store to subscription-based software.

While software subscriptions may make consumers concerned about paying for their software every year and while it may be costly, it does have many benefits. Microsoft has already said that they expect within 10 years, Office 365 will be the only way people will be purchasing Microsoft Office. This could easily be a self-fulfilling prophecy if Microsoft were to discontinue the single license, one-time purchase versions of Office. This prediction will also be aided by the growth of the cloud and software as a service which is on the rise in business and by home users. Office 365 may be easier for consumers to adopt as they get used to paying for software on a recurring basis and dismiss their initial sticker shock of the annual fee.

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