Microsoft for rent

2000-07-14

If it's Microsoft, it's good, right? Well in this case it just might be. On Friday the company launched its software-for-rent strategy in which software licensing will be paid for on a subscription basis rather than as a one-off fee. This announcement is expected to be the first of a series that will align the company with the principles and practice of Application Service Provision (ASP), or the delivery of applications over the wire.

The main strengths of the subscription model for applications are based on addressing the current issues of software delivery and licensing. The current approach causes multiple versions, incompatible installations and (perhaps most infuriatingly) the need to pay for irrelevant parts of bloated software bundles. Let’s be honest here – how many times have you really used that copy of Microsoft Access? Furthermore there is the constant bugbear of having to pay for upgrades to packages in order to resolve bugs in previous versions. Wouldn’t it be great if, for a one-off, yearly fee we only have to buy what we want and all upgrades are free? Yes – if the price is right.

The only flaw so far in Microsoft’s strategy is the issue of pricing. In pilot studies, the company took the list price of a package and divided it by 24, effectively meaning that if you are likely to use a package for more than two years without upgrading then you might as well buy it outright. That sounds a bit steep to say the least – in other words, one advantage Microsoft will not be promoting over shrink-wrapped software is that of cost. Of course this does not have to be the only costing model. It should be possible to buy a package for a month, for example, or even for a minute (for example to open and print an attachment created by an obscure package). Certain packages – the obvious ones being word processors, spreadsheets, email and Web browsers, should rightly command a premium as they are them most used (but conversely, maybe should also be subject to quantity discounts). The fact is that the issue of cost has yet to be fully fleshed out, by Microsoft and everybody else. It is clear that different application types will need different models – for example it is unlikely that any corporation will be running SAP on a pay-as-you-go basis. However the definition of these models – and how they fit together – will take time.

Ultimately we see one of the greatest strengths of the ASP model to be one of granularity. Everything costs, but it should (as in, we need it to be) possible to pay for specific software functionality on an as-needed basis rather than through purchasing applications just in case. This is true for office applications, enterprise packages or anything else. Over the next few years, hopeful vendors will attempt different ways of enticing corporate customers to invest in their own approaches. The customer, or the business case, shall decide.

(First published 14 July 2000)