Sunday, March 19, 2006 by JcRabbit | Discussion: Personal ComputingPeople sometimes forget that making software is a business. Inexperienced shareware authors seem to forget this sometimes too, and offer life-time free upgrades. Business-wise this makes no sense and, in the long run, they are shooting themselves (and indirectly their customers) in the foot. This is why and what usually happens:
A successful business has to rely not only on new customers but also on repeated buys from their existing customer base in order to remain viable. This is because while a new business's customer base may expand rapidly in the beginning, at some point this expansion will eventually stop or dwindle to a fraction of what it once was when the novelty wears off or the market becomes saturated.
As long as a shareware author can derive his livelihood from what he does, he will keep at it. But once cash flow trickles to a fraction of what it once was - and it will with a life-time of free upgrades policy - and the shareware author begins struggling just to put food on his table, he will finally realize that all he managed to do was to put himself into a corner. He will then do one of three things:
1) Get a real job and abandon the project altogether.
2) Rename his current project, declare the old one dead, add a few new features, and sell it off as if it was a brand new application (so users of his old project have to pay again).
3) Start a new, completely different, project.
In the first case, everybody loses. Your 'lifetime' free upgrade license is now useless simply because the product is dead and no more upgrades will be issued.
While the second case seems a bit far fetched, I've seen it happen quite often. Not willing to discuss the ethics of such a move (the alternative is worse), I can safely say that your 'lifetime' of free upgrades license is also useless in this case.
The third case is just a delay of the inevitable, because, unless the shareware author changes his business model, the same thing will happen again further down the line. Plus, his focus will now be on the new application - the one that is bringing him the real money - instead of the old one. Updates will now dwindle to a trickle of what they once were. The product is not dead but it is in 'limbo'.
Note that I've been talking about 'professional' shareware authors (those who manage to make a living out of what they do), I'm not even referring to those who do it simply because they like it, or because it gives them pocket money. Their story is a lot simpler: one day (sooner than you think) they will lose interest and, unless someone is there for them to pass the torch, their project is dead too.
I hope you now understand better the real value of 'life time of free upgrades'. What do you prefer? A product that offers you free upgrades for life but is only around for a couple of years, or one where you have to pay from time to time to support development - and only when and if you think the new features are worth it! - but which will keep you happy for many years to come (Winstep Link has been around since 1998, by the way) ? That's a question only you can answer.
So, what is the best solution for both the user and the shareware company? Something called the 'subscription based' model. This, by the way, is also Stardock's main business model.
When a person hears the word 'subscription', their first reaction is to cringe and think they are renting the software rather than buying it. Nothing could be further from the truth:
When you purchase an application, subscription or not, the version you bought is yours FOR LIFE. It will not time out on you or suddenly stop working if you don't renew your subscription. It's like when you purchased Windows 98, for instance. It's yours to keep. That, however, does not mean that you are entitled to upgrade to Windows XP for free. When the time comes, you can choose either to upgrade (and pay for the privilege) or keep on using the Windows version you bought. If you accept this from Microsoft, why shouldn't you from shareware companies?
Now, the subscription method has, for the user, a HUGE advantage over this way of doing things. Keep with me:
Still using Microsoft's example, between Windows 2000 and XP, all you got for free were service packs and bug fixes. No real new features. In fact, Microsoft saved the real BIG changes for XP.
In the shareware world, when a company is offering minor upgrades for free and only charges for major upgrades (Winstep's former business model), in order to justify a major upgrade most companies will sit on top of the real big changes/new features until they can round up enough of them to justify a major upgrade. In practice this means that your free minor version releases will not contain much more than bug fixes and minor enhancements. The really juicy stuff is saved up for later.
Why is it like this? Because otherwise the difference between the last free minor upgrade and the major version release would be so relativelly minor that few users would feel compelled to upgrade. The price the user pays is that the introduction of really cool features X and Y is deliberately delayed by a few months or longer, so that those features can be part of a major version release which you will have to pay for anyway. I'm aware this might shatter the ilusions some of you have on how the shareware business operates, but the fact is that this *is* a business. And, business wise, what I described above makes sense.
Now, my problem is that I never liked to hold back on implementing new features. The result, for instance, is that nearly 5 years have elapsed since the first WorkShelf release and we are still at version 1.x. Five years of free upgrades with lots of really cool new features being added all the time. Same thing happened with NextSTART, it took 3 years for it to go from version 2.0 to 3.0. It's a bad business decision that is sustainable as long as you have a large continuous flow of new users, but which will bite you back once the market becomes saturated (and it always does).
Now lets compare this mess with the advantages of a subscription-based business model (and, again, keep in mind that the subscription is ONLY for the updates. You get to keep what you paid for and all the free updates you might get until your subscription period runs out):
Advantages for the user:
a) Really cool features X and Y are now added all the time, as soon as they are thought of/requested. This is because the shareware company no longer has to worry about saving them for a major upgrade.
b) You know and see your money being put to good use, plus you know you are keeping the company from going belly up, thus ensuring many years of continuous improvement on your favorite applications. You also know that, if you don't like the direction things are going, you always have the choice NOT to renew your subscription. You get to keep everything you got until that moment.
c) You know the company MUST keep a constant flow of updates, otherwise users will not renew their subscriptions. In other words, you keep the shareware company on their toes, to your advantage.
Advantages for the Shareware company:
a) You no longer have to hold back on implementing cool new features. You can add them as you think of them. Constant developement is not only encouraged as it becomes a necessity.
b) Your company is now supported not only by the flow of new users as well as by your current user base. As long as you keep your current user base happy, you know your company won't suddenly go belly up because your market has become saturated and you can no longer afford to put food on the table.
From my point of view, the subscription model for updates is a win-win situation.
Even the major anti-virus companies, like Symantec and McAffee are going for it: you purchase their AV applications and you get a one year period of free virus database updates. After that you can renew your yearly subscription in order to keep your Virus database current. This not only supports the company (what good is a dead AV company with a stale virus database?) as it keeps them on their toes regarding new viruses that suddenly pop up on the wild.
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