It definitely is beneficial to be a service provider. Rent, in general, is beneficial to the rent seekers for the reasons you outline - steady, passive income[0]. It's really awesome - that's why every business in tech seems to be adopting this model.
It also seems to work for business customers, who have many tools available to handle logistics of subscription, a more equal position in the relationship, and more ways to deal with cashflow problems.
It's much less beneficial for individuals, though. Some problems:
- Even if the monthly subscription is 10% of its would-be box price, I'm likely going to pay more than I would if I could buy it.
- By subscribing, I gain a new relationship to manage. Managing relationships is cognitively taxing, there's only so many an individual can handle[1]. I don't want that relationship with you, I want to use a software products, no strings attached. Much like when I buy bread, I don't enter into relationships with the bakery, the mall, the flour plant or the wheat farmer[2].
- As a part of being in a relationship with you, I'm bound by your ToC, which limits what I can do with the product. It's not a noticeable problem when dealing with web applications, as limits are often enforced technically - but as more physical, household products become wrapped in services, this is going to become a bigger problem. Right now, the manufacturer doesn't care if I use my dishwasher for steam-cooking[3]; in a service model, this would be disallowed by ToS.
- The modern means of enforcing the core of our relationship - me paying you for access - usually revolve around the software being hosted on your servers. This limits the long-term utility of the product over a version I could keep on my computer, and poke inside if needed.
- If our relationship ends for any reason, I lose the goods. It may be because of me violating the ToS, but it also may be because your company decides to shut down the service, or gets acquired, or goes bust. It's particularly annoying with physical products, which then get taken away or become expensive paperweights. It's a risk I have to keep in mind as part of managing our relationship (and which realistically I won't, and then wake up one day with few days or weeks for figuring out how to replace your service with something else).
- It may seem that incentives of SaaS are better aligned with their customers - I pay, you deliver improvements. But another way of looking at it is, you release an incomplete product, while I pay in hope it'll get improved. Much like "one-and-done" sales have their perverse incentives, so do services (worst case that sometimes happen: making switching costs high on purpose, to ensure I keep paying).
Personally, I'm particularly tired of the relationship angle. I want to exchange stuff for artifacts that give me powers - not bind myself to ever growing number of ephemeral business entities.
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[0] - Not 100% passive because you have to keep the infra running and offer some kind of support, but passive enough that quite a lot of companies seem focused primarily on growing their userbase, not catering for the existing users.
[1] - Rich people and businesses handle this by paying someone to deal with it.
[2] - Actually, I do enter into a relationship with the bakery, but it's entirely handled by consumer protection laws, so the only thing I need to manage about it is knowing what government branch to e-mail with the receipt. And that management cost is shared across all my purchases.
[3] - Worst that can happen is I lose warranty over some more peculiar use cases or tweaks.
It also seems to work for business customers, who have many tools available to handle logistics of subscription, a more equal position in the relationship, and more ways to deal with cashflow problems.
It's much less beneficial for individuals, though. Some problems:
- Even if the monthly subscription is 10% of its would-be box price, I'm likely going to pay more than I would if I could buy it.
- By subscribing, I gain a new relationship to manage. Managing relationships is cognitively taxing, there's only so many an individual can handle[1]. I don't want that relationship with you, I want to use a software products, no strings attached. Much like when I buy bread, I don't enter into relationships with the bakery, the mall, the flour plant or the wheat farmer[2].
- As a part of being in a relationship with you, I'm bound by your ToC, which limits what I can do with the product. It's not a noticeable problem when dealing with web applications, as limits are often enforced technically - but as more physical, household products become wrapped in services, this is going to become a bigger problem. Right now, the manufacturer doesn't care if I use my dishwasher for steam-cooking[3]; in a service model, this would be disallowed by ToS.
- The modern means of enforcing the core of our relationship - me paying you for access - usually revolve around the software being hosted on your servers. This limits the long-term utility of the product over a version I could keep on my computer, and poke inside if needed.
- If our relationship ends for any reason, I lose the goods. It may be because of me violating the ToS, but it also may be because your company decides to shut down the service, or gets acquired, or goes bust. It's particularly annoying with physical products, which then get taken away or become expensive paperweights. It's a risk I have to keep in mind as part of managing our relationship (and which realistically I won't, and then wake up one day with few days or weeks for figuring out how to replace your service with something else).
- It may seem that incentives of SaaS are better aligned with their customers - I pay, you deliver improvements. But another way of looking at it is, you release an incomplete product, while I pay in hope it'll get improved. Much like "one-and-done" sales have their perverse incentives, so do services (worst case that sometimes happen: making switching costs high on purpose, to ensure I keep paying).
Personally, I'm particularly tired of the relationship angle. I want to exchange stuff for artifacts that give me powers - not bind myself to ever growing number of ephemeral business entities.
--
[0] - Not 100% passive because you have to keep the infra running and offer some kind of support, but passive enough that quite a lot of companies seem focused primarily on growing their userbase, not catering for the existing users.
[1] - Rich people and businesses handle this by paying someone to deal with it.
[2] - Actually, I do enter into a relationship with the bakery, but it's entirely handled by consumer protection laws, so the only thing I need to manage about it is knowing what government branch to e-mail with the receipt. And that management cost is shared across all my purchases.
[3] - Worst that can happen is I lose warranty over some more peculiar use cases or tweaks.