Subscription-based software: does it work?

Question

While I worked with a software company that sold a specialized software product. Ever so often they have released a patch for free and a new version that would require upgrade fees. This usually works in the software industry.

After some time, the company decided on a new subscription-based strategy. This turns out to be a way for a software company to charge a small incremental fee for each "transaction" that runs on their software. In accordance with this model, corrections and updates were included in the transaction fee, and the number of transactions was “true” in the number of transactions so often as to charge a fee.

I think this is the best way to develop and sell software. The software company receives a continuous stream of income, the client does not need to worry about the cost of updating, etc., And if the client becomes really large, your income stream grows with growth.

The problem (and the reason for this question) is that I no longer see anyone doing this. Is it because this model does not work? Did I take off too simplistic the idea of ​​developing and selling software without seeing some of the negative aspects of this model?

[EDIT] I am interested in the opinion of developers about whether writing subscription-based software is a good way to develop software.

So, this question is aimed at professional developers who worked on commercial applications: Can anyone talk with experience on this model and why it works / does not work?

Answer 1

Yes Yes. See salesforce.com for an example.

Answer 2

I used to work for a company that switched from a product license to a subscription-based model. Here are some notes about this:

• We offer both a product license and a subscription model.
• In the product license: the user buys "n" the number of places to use them.
• In subscription models, the customer buys your software for the “x” months and “u” people.
• This will help you if your company also develops “consultants” who will work with your clients to get software implementation, etc. on the client site (any required installation, training, etc.).

In fact, if you see services such as GMail enterprise, Fogbuz, etc., they provide different pricing options:

• where you want the application to be hosted: your servers or their servers
• you will be charged $ x for the number of people using the software.

I think that the time-based subscription model will definitely work at the current time, and in fact the cloud model helps such freedom in revenue models: for example, you can choose to “subscribe” to the cloud database rather than buying a database server .

Answer 3

This is not exactly the same, but the basecamp of 37Signals is very successful with a monthly subscription, and FogBugz also uses the same model. The approach you are talking about seems like the idea of ​​MircoPayment, which in the early days of the Internet was perceived as income. I’m not sure that someone successfully made money from this model, I’m sure that a lot of VC was spent trying.

[Edit] I think this is a great way for small independent business software vendors. The combination of SAAS and subscription is a great way to quickly earn income. There are a number of benefits.

1) Continuous income

2) A small or zero down payment brings customers superior to this problem with the price of a credit card (it’s easier to charge $ 10 per month, not $ 100)

3) Creates a strong connection between the ISV and the provider

4) The chance to increase, assuming that the offer is good

And the only way to become a major software provider is to be small first.

Answer 4

Red Hat seems to think this is working. Buy a year of support to receive all updates / etc / etc. Except that they allow you to store the product when the year comes (so I think customers are like that too) =).

Answer 5

Due to the nature of subscription-based software development, this is actually the way to go, but how to make sure you have updates that actually make the software pay for the subscription.

If you provide a service, it’s much easier to motivate a subscription, but if you plan to pay people monthly for monthly releases, it's good than a fine line between success and complete failure. I do not see how this will work with most programs.

Update: @Dscoduc

Then I would call it a service. Make a clear distinction between software release schedule and support. If you want to charge a premium deal, it’s good that the service should be clean. But I see how this might work. People can end up buying subscription-based software that they can adapt to meet their needs without programming experience and at a low price.

Your task is to be able to listen to your customers and really find a way to respond and make this the basis of the life cycle of your software, and it will not be easy to do.

Maybe we should ask for stackoverflow for a way of marking content that is not programming related but interesting for programmers.