Selling software by subscription

Selling software by subscription

Users may soon be subscribing to Microsoft's Office 95 in the same way they subscribe to magazines. This is especially true if vendors follow the lead of companies, such as Netscape, and offer subscription-based pricing models and electronic distribution. Such plans give users flexibility in downloading software products and upgrades from the World Wide Web, according to a recent report by US-based Wessels, Arnold & Henderson.

"The key is, can companies distribute software in a way that is not disruptive to the client?" said Peter Schleider, an analyst at WA&H. If they can, "users themselves can determine when to upgrade", he said.

Spurred by the popularity of the Internet and Sun's Java, many industry watchers say software developers will soon look more like publishing firms. "They will constantly provide output to users instead of sending out bulky, convoluted upgrades every year or two," the report says. Companies that continue down the path of traditional software sales and distribution could be left behind by firms that offer cheaper, faster and easier ways for users to get software and upgrades at their leisure, the report adds.

Currently, Netscape offers users the choice of buying a yearly subscription to Netscape's Navigator Web browser and server software. Subscribers can download the client and any updates from the Web at any time and automatically receive updates to the server software. Netscape originally sold Navigator like other software, but the company noticed that rapid-fire upgrades were taxing its distribution efforts. A subscription plan still earned money for the firm and gave everyone a little breathing room.

Microsoft is slowly following this path. It has begun to offer Service Pack upgrades for Windows 95 and Exchange Server for free over the Internet. "As release cycles become more continuous, you will see the business model change to a more subscription-based pricing model. The customer is getting value practically every month or every other month," WA&H's Schleider said.

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