Software subscription - to be or not to be?

    A year and a half ago, the company Nanosoft was formed, which announced its goal to develop the first free domestic CAD platform nanoCAD. In November of this year, the platform finally came out on its own - immediately in version 2.0. An article even appeared on this event on Habré , where we talked about it. Our platform is free, but vertical applications based on nanoCAD are distributed according to a somewhat unusual (especially for the conservative CAD world) sales scheme - by subscription.
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    What it is? Why are we doing this? Why it was impossible to do “like everyone else”? This publication would like to answer questions and, if it is interesting, offer further communication.

    Next, under the cutter,


    Stage 1. How was it?

    As it usually happens, your position is easier to explain if you trace the story. In this case, let's see how the concept of software prices in the CAD field was transformed.

    Historically, CAD is a rather expensive pleasure: it is a production tool, and tools are expensive. Despite the wide range of prices (from 200 to 20,000 $ and higher), the bulk of CAD is in the range from 3,000 to 6,000 $. This is the price of one workplace - if the project organization employs 50 people, feel free to multiply by 50. Of course, even for organizations that are professionally engaged in design, this is a high price. And for other industries (and even more so for ordinary users), such a price of a licensed program does not pay off. Is it really possible to close or draw on the kulman with a pencil and an eraser, rolling back into the past and finally losing competitiveness? No wonder piracy is booming ...

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    Figure 1. Classic sales scheme: “bought a license, and then buy updates” The

    classic way (Fig. 1) of software distribution is based on the principle “I bought an endless license, and the next version - at the price of updating”. It is like distributing a book (i.e. an intellectual product)): the developer writes the version (book), prepares it for a product (box, documentation, disk, security key), releases the product to the market and sells it over a period of time. If users find errors in the current edition of the book (oh, program), then corrections are issued. If the sales were successful, a sufficient number of comments has accumulated for the first version - a new version is released and the circle repeats. In the new circle, an exception is only for current licensed users - they can make a preferential update from the old version, which usually amounts to 20-30% of the previously paid price. It's simple, right?

    According to sales experience, it can be seen that even in our country with a high level of piracy, licensed users update about once every 1-3 years. But some of the users who bought the license then go to competitive solutions (rarely) or to pirated versions (more often) - the latter especially seriously complicates the life of developers and annoys them ...

    There is one point: when the number of potential users increases, and competition increases, then the developer must release new versions of programs more and more often - it is necessary to quickly fix errors, introduce new functionality according to the wishes of users, implement interesting ideas that have appeared in competitors. And here we are gradually moving to stage 2 ...

    Stage 2. How now?

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    Figure 2. Updated sales scheme: “bought a license, and then buy support.”

    With the development of the market, a new sales scheme is gradually developing, which can be formulated as follows: “I bought an endless license, and then buy support and regular updates.” The idea is that one-time updates move into the mainstream of regular payments (Fig. 2) . I will explain.

    For a new user, nothing changes - he buys a license for the same price as before. But the current user can (or should - depending on the developer's policy) “smear” the payment for the update in time and “put” his software for support by regularly paying the developer a fixed fee (usually 10% of the price of new licenses). In fact, this is some kind of credit for future updates and a question of trust in the developer, right?

    The advantages of this approach for the developer are completely clear:

    1. More rapid software development: the developer is not bound by the product version framework, he can switch to the regular release of updates, which will include both new functionality and error correction.
    2. Protection from competition: if the client regularly pays fees, then the transition to competing solutions is theoretically more difficult (although competitors do not sleep too - they come up with ways to lure customers). In addition, quickly satisfying user requests, the developer increases loyalty to himself and his program.


    You may notice that the new approach moves the software to the category of services : first, the user buys the goods (the latest packaged version of the program), and then draws up the services for technical support. But there are subtleties too ...

    Firstly, software was not originally a commodity in the classical sense. Having bought the program as a product, the user has only the right to use it (the owner is still the developer). This means that the program cannot be resold or transferred to another user (only the developer can give permission to use), the program cannot be returned to the developer (the user can refuse to use the program, but no one will return the money to him), the replication of the goods does not lead to the replication of the right to use, which means a copy of the product is unlicensed by definition.

    Secondly, by purchasing a product with a perpetual license, the user is deceived - the program will not work indefinitely. Doubt it? Well then, try to run a program released 10 years ago under the new OS. Another option: request technical support for CAD running under DOS or purchased 5 years ago. In the best case, technical support will talk to you nicely. Yes, and what can they do? Raise the old code and start fixing it? Most likely, you will be given friendly advice: update the software. For extra money. That is, you have a license, but you cannot use it. Go to the pirates for new versions?

    Stage 3. Subscriptions

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    Figure 3. Nanosoft basic sales scheme: “buy a subscription”

    And here we come to the following thought - why not finalize the software as a service: “Buy a subscription, which consists of a commercial license, support and updates.” After all, we use the services of gyms, rent rooms, machines, cars, pay for calls by mobile phone, go to movie theaters - why not include software and software into this scheme?

    So, is it really rental software ? Look - quite attractive:

    1. Subscriptions make licensed software more affordable. If at stage 2 we “spread” the price of the update, then with the subscription the price of the software “spreads” (decreasing, for example, by 3-4 times — the average time spent working with one version of the program) - see fig. 3: The initial barrier is reduced and CAD is available even to a private designer. We believe that, ceteris paribus, the user will choose licensed software, not pirated. Subscriptions are a good way to check if this is the case.
    2. Subscriptions allow you to move software costs from the category of variables to the category of constants. This is good for both developers (regular receipt of finances) and users - fixed costs are easier to control and plan, to carry out according to financial statements. The software turns into classic fixed assets, which are depreciated on the created products.
    3. Subscriptions are easier to manage. Reduced the number of designers? Reduce the number of season tickets purchased. Reconfigured jobs? We refuse part of the subscription, we buy others. Flexibly.
    4. Subscriptions allow you to respond to customer requirements. Is it convenient for the client to pay once a year? Please annual subscription. Once every two years? Two year subscription. Does the client have special requests for software and its maintenance? You can develop specialized subscriptions, which will include advanced technical support, employee training, software customization, the development of new modules, etc.
    5. Subscriptions protect customers from rash costs. If the software does not suit, does not develop, or its development has gone in a direction that does not meet the expectations of customers, then next year customers simply do not renew their subscription, signaling to the developer: “something is not right in the Danish kingdom”.
    6. Subscriptions allow the program to grow faster. Developers are interested in regularly updating programs and developing their functionality. This, by the way, is a big responsibility for developers - if there is nothing to develop, then you have to update the interface.
    7. Subscriptions are the only way with the intensive development of the program. A “classic” sales scheme is good if the program is released once every 2-3 years. But if new versions are released every six months, then for the user this scheme will be too expensive, it is better to slow down a bit with the purchase and wait for the program to gain functionality. Subscriptions allow not to postpone for later what can be purchased today.

    I don’t think I have listed all the advantages of subscriptions ...

    So, subscriptions are a compromise, and users have the opportunity to purchase a software product at a price that suits developers. Theoretically, the idea of ​​piracy is becoming obsolete, no?

    But in practice, the subtlety arises in the implementation of subscription - subscription must be limited in time, otherwise their meaning is lost. That is, the software should stop working after some time. "How? Are you taking the program license from us? Does she stop working? And if in a year we need to correct the drawings? Do you put us on the needle? ”, Users say. There are several solutions: either keep the ability to work with drawings after the expiration of the subscription (for example, using a free platformnanoCAD ), or still leave an alternative sales scheme (in the end, after watching a movie in a movie theater, the viewer can buy a DVD-ROM for re-viewing the house).

    Conclusion

    The question arises: which scheme is better ? We think that subscription is a more reasonable and convenient scheme. In IT, it is implemented when selling Internet services and system software (antiviruses, firewalls, etc.). We implemented it first of all, despite the fact that this is a novelty for the Russian CAD market, and many users do not yet perceive it and require boxed delivery. What do you think?

    PS By the way, we still realize the classic boxed delivery for vertical solutions: nanoCAD SPDS 2.0 ,nanoCAD Mechanics 2.0 can already be bought as boxes for 25 thousand rubles. (against 7 thousand rubles for an annual subscription). All subsequent paid software products will be sold both by subscription and by box scheme.

    PPS Interesting? Continue? If so, what topics are interesting in the future?


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