Software as a Service

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Software as a Service

Steve Jones - SSC Editor

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Points: 734459
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December 18, 2006 at 5:48 pm

#171642

Software as a Service
I hear a lot about software as a service lately. Actually since I live in a country known for producing more services than goods (allegedly), it's not surprising we'd be seeing service in the news a lot. Service industry, professional services, service contracts, service oriented architecture, service, service, service.
But how should we license software services? Should all software, or more of it, be paid for as a service? I saw this article on licensing and it caught my eye because it talked about how more companies are starting to license their software this way. Or at least thinking about it.
And it makes some sense. There are some good arguments to be made for leasing software. Less IT support/infrastructure required, upgrades included, lower entry costs, etc. There are some good arguments to be made for not doing it as well: lack of control over upgrade timing, possible availability issues, security, better use of existing IT infrastructure, etc.
I'm sure some of you will be on one side and some on the other, though I'd bet most IT guys prefer to buy it, own it, and manage it. However for smaller companies, it definitely makes some sense to lease some software as an entry into the market. How many of you would lease a BI product for 2 or 3 people and let them try it out? On the other hand, above a certain size, it doesn't make any sense to lease software and you're better off signing a large enterprise/site license agreement and using what you need.
To me the solution is both. Let the startup lease Word, Excel, Dynamics, etc. and then let them convert to purchased software when they're ready. If software companies made it easy to move back and forth, then you'd find that companies would take advantage of both systems, especially if they can move between them as needed. And with computers calculating all the costs, why not make it easy for them to move?
Software licensing will probably always be a sticky situation because it's an intangible product and the marginal cost of the product is near zero. But by giving consumers choices, you open up your marketplace further and let people get what they want. And what they want to pay for.
Steve Jones

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William Plummer SSC Eights! Points: 803 More actions · Answer 1

Steve,

I normally agree with all you have to say, but I take exception to your third paragraph where you state "Less IT support/infrastructure required,". There is no way to make a blanket statement that if I get software free, or pay by individual license, or lease on an annual basis, and on to as many schemes for obtaining software as you can imagine that you can say the way you purchase will reduce IT support and infrastructure required.

In some cases maybe, in others definitely NOT!!! Take free for example... I download from a web site or get it from a pirated CD. No cost, but if I really need this software to do business with my clients, then I will have to have the expertise to support and use it, or eventually pay someone to help me use it. Friends in the IT business will usually point out to you that you are making money using this product and maybe you should share a little with them for making up for your lack of skills in using the application

Enough said, but no matter how you market software, if the product is used for making money in your business you will eventually pay for someone to support that product. If you only use the free software for recreation then depending on how much satisfaction you derive from it, you may never incur an expense past the free download.

Bottom line... Software development requires many hours of work. The more useful the product, the more time required to get that product to market and the more time to upgrade the current version for the end users that always find reasons to ask for more features. Unless you do development as a hobby and stumble onto a very simple way to make everyone's life easier or more interesting, your creation will eventually take a staff of people to keep it useful to the end users. That staff requires food, clothes, etc. to keep them comfortable.

And I think that really is enough said, except...

Have a Merry Christmas and a Blessed Holiday Season

john-132685 SSCertifiable Points: 6084 More actions · Answer 2

I have one fundamental problem with software licensing: they want to disclaim any responsibility for faults. They need to either treat it as any other product or accept full responsibility, anything else is just plain wrong (though, like many things, legal).

I have no problem buying a product as long as I can return it (try doing that with a game or other software) or resell it like I would my car. On the other hand, I wouldn't mind leasing/renting software provided the service warrants the price being paid.

Current laws allow software makers to sell their software with no recourse for refund if you open the package and find out it is a piece of crap, or won't work on your hardware or, wasn't what you needed, destroys your system, kills your business... Software is literally a "pig in a poke" and I cannot fault the pirates while software vendors are so unrestrained.

As for the other way around, remember Doom? Released for free and then sold for a reasonable price for additional functionality. What fluke of nature was it that allowed them to profit under such careless disregard for the evil consumers? (that was sarcasm)

Steve Jones - SSC Editor SSC Guru Points: 734459 More actions · Answer 3

I'm not sure there's less infrastructure required, but it's an argument being made by salesforce.com, SAAS, and others since they do some help desk stuff for their software.

I do agree that software needs to be treated differently with more responsibility for vendors. It might slow some development and innovation and hurt some of the smaller companies, but we'd see better software.