Video killed the radio star, and SaaS killed Microsoft?…
SaaS is a better way to deliver software, in many ways. But installed software is better than SaaS, in some ways. So, just why is SaaS on the upswing, while Microsoft Office is on the way out?
Better features, easier implementations, great collaboration, etc. That’s the easy answer, and a lot of it is true. But I’ve also been thinking about how the simple difference in pricing models may be the biggest factor.
With installed software, you buy a “perpetual license,” meaning that you pay for it once, and then you can use it forever. Or at least, you can use the specific version you bought. (And that means that the publisher has to create new features in the next version to “bring you along,” which tends to pollute the product and UI with crazy things that you spend half your time trying to figure out how to undo. See: auto-formatting in Word).
It’s this perpetual license scheme that may prove to have been the fatal flaw of Microsoft’s dynasty, albeit one that has taken a long time to prove fatal, and that sure generated a lot of wealth along the way. But here’s what I’m thinking. Where else do you buy a (relatively expensive) product that has zero resale value the moment you pay for it?
In the car industry, you buy a car, and if you want the newest make & model you’ll have to go buy it. But, there’s a market for your old car, and you can get your equity out of it. Not so with a perpetual software license.
Contrast that to a service, which you pay for as you use it. That’s what software really is, and has been, way before the advent of the term SaaS. Using software that’s of value to your company is an expense, it’s not an asset that you buy, depreciate, and that has a salvage value. So, it just makes sense for software publishers to price and deliver their products as a service, rather than as a product/asset. As much as I like to think that it’s our great SaaS features and performance that are going to lead to our continued growth and success, perhaps it’s also that our pricing model just makes a lot more sense?…
