Service and Subscriptions: The Future of Software

With Adobe’s abandonment this spring of “shrink-wrap” delivery, the software industry reaches a milestone that only a few years ago looked more like dreamland than reality. When Microsoft, the world’s largest software company, first released its “Office Live” on-line product early in 2006, for instance, the potential customer who wrote, “… I can’t see the point” remained in the majority. Microsoft had already earlier experimented with subscription models for Windows XP and Office, then retreated by 2001. As clear as it was that software was due for change, the outline of that change was exceptionally cloudy.

In retrospect, it might all appear inevitable. Microsoft now is fully committed to subscription-based Office 365, for example, and expects $1.5 billion in revenue over the next year from the product. The other software companies comparable to or larger than Adobe– Oracle, SAP, VMware, CA, Symantec, and Intuit–all are shifting their business from shrink-wrap to business models that combine subscription-billing and on-line delivery in various fashions.

Software is far from the only industry the ‘Net is revolutionizing, of course; all the entertainment and news media are trying to figure out how to pay the bills, and what “sustainable” can mean in a world of perpetually-deflating prices. A couple of conclusions are clear: “service” and “brand” are the only values left to sell, and consumers simply expect everything to work. This is why I’m so enthusiastic about application performance management (APM): control over the responsiveness of your on-line applications is no longer a feature. Now, it’s a necessity.