The other shift is towards charging subscription fees for software. Microsoft is the latest and most important company to push towards the software subscription model with its new licencing policies for Office. Writes Rebecca Buckman in the Wall Street Journal:
With sales of traditional desktop software not growing like they used to, Microsoft is shifting toward a revenue model based on subscriptions. That means old, cash-cow products like Office will soon be retooled so Microsoft can sell them — as well as their separate features such as e-mail and word processing — for recurring fees.
The crucial piece of Microsoft’s new strategy: Many of [its] businesses will sell subscription, Web-based services instead of charging a set price for a box of shrink-wrapped software. “The future of software is subscriptions,” Microsoft Chairman Bill Gates said at a company event in March.
Writes Amy Wohl:
Access to products or services will ultimately be secured not by purchasing permanent licenses (which is why so many customers still use Office 95), but rather by annual subscriptions that include the use of base software, its upgrades, support, and some level of web services.
Premium services will probably – not unlike cable TV offerings – be charged separately, in groups or singly. So you might purchase an annual premium subscription for graphic services or statistical analysis, but “pay per use” for the budget software you need once a year.
At the same time, there is another interesting trend. Our world on the desktop has now coalesced into four primary applications: Email, Web, Instant Messaging and Productivity Applications. In fact, in the past few years, one distinct shift has been the increasing amount of time being spent in the Email client.
What is therefore clear is there is a discontinuity happening in the world of software which is being brought about by the Internet. Open-source software has also added to the disruption. While so far all this has not yet made much of an impact on the software used on the client side (most of us are stuck with Windows, Internet Explorer and MS-Office), there is an opening for innovation driven by Web Services, which is all about software components being aggregated together from the Internet.
What this mix of Web services and subscription model for software will do is to make state-of-the-art software affordable for a lot of the world which does not either use it. It also creates opportunities for creating software for the New Enterprise. We will explore this further next week.
There are two other interesting developments which will have a major impact on the enterprise: the creation of an envelope of ubiquitous network connectivity, and devices which plug into this network.