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Leased World

By onyxruby in Technology
Thu Feb 15, 2001 at 09:51:55 AM EST
Tags: Software (all tags)
Software

Is the future a leased one? Will we be forced to pay a monthly software bill along with our phone and electricity? Companies like Microsoft are letting the word out that you will have to pay a yearly subsciption for your operating system and software.


First, I do not intend this merely as a Microsoft bashing article. They are the most prevalent, and thus have been picked for my example.

Microsoft recently announced that they are going to buy Great Plains software. Great Plains is a company that specializes in hosting applications. If you buy into them, you must keep buying into them. Hosted applications are a lot like cocaine. Once started, the habit is hard to kick, very expensive and quitting has nasty repercussions. Your data is effectively held hostage. It may be reasonable for a consumer to take a loss on their data and simply switch to another product, but this could easily bankrupt a business. Once you join, rates can be raised, without reasonable limit, and the only practical option is to open your checkbook. This is the world of systems like .Net, a world in which licenses are leased for a limited time, and customer revenue streams continue for unlimited time.

Now, what sane IT manager would ever willingly enter into such an arrangement? Most likely the IT manager won't, but the PHB in charge, who sees only predictable fixed costs, along with slashing IT headcount will be tempted. Initially subscription based and or hosted apps will probably be optional for one version. Once Microsoft offers their product on a subscription basis only, revenue will continue, regardless of whether or not people upgrade. By having hosted applications that can only be run off of the software companies servers, strict enforcement of the exact letter of license agreements becomes possible. I see no reason why this practice would not be followed by Apple, Novell or the Unix market. Some of this may sound radical, but keep in mind that many companies, windows and *nix based, have already started to do this.

What will the repercussions of this be? In the server market, most likely Linux would flourish, as much out of spite as any of it's technical merits. However Linux is not yet ready for widespread use among the masses as a desktop. Most business desktops need to have an office suite. For practical purposes this is going to MS's office suite. The alternates do not even register on most IT managers radar screens. Concerns of the tie between MS and Caldera are enough to get the US Justice Dept to start an additional anti-trust investigation into the office suite market. In the home market, especially once manufactures only offer MS's subscription based OS, there is going to be widespread financial misery. While Linux will certainly gain growth in this market, WINE isn't yet ready for most computer games that the masses want to play. This alone will be enough to keep most people paying MS a subscription. The potential for exploitation of the public is absolutely enormous. Will this be enough to make GPL'd software and Linux become mainstream with the masses? What do people here see as the repercussions to this industry shift?

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Poll
My OS of choice is
o Linux 55%
o W98 9%
o Mac OS 9%
o W2K 14%
o Be 5%
o NT 4 2%
o OS/2 0%
o W ME 3%

Votes: 129
Results | Other Polls

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Leased World | 28 comments (23 topical, 5 editorial, 0 hidden)
A thought. (3.25 / 4) (#2)
by xriso on Wed Feb 14, 2001 at 10:48:16 PM EST

If a company has customers so much tied to its product, there isn't nearly as much motivation to produce upgrades in the first place. Perhaps the only remaining reason would be to make the product more attractive, so that there's more incentive to get hooked on it. But once there is a substantial user count, the software can rot away with hardly any penalty to the producer.
--
*** Quits: xriso:#kuro5hin (Forever)
Counterpoint (4.50 / 2) (#24)
by Eimi on Thu Feb 15, 2001 at 03:09:44 PM EST

Or it could cause much better software. Software today is sold mostly as upgrades, so the incentives all wrong for the company. The company has to make substantial changes in every version to try to tempt people to upgrade Sometimes change is good, but I feel like a lot of the time the only reason for the changes is to justify a higher version number. Of *course* they don't make file formats back compatible--they need some way to convince you to move up like everyone else. Of *course* they don't release bug fixes as soon as they can--need to buy the next version to get that. I think a lease type model could lead to many more minor upgrades, since now they'd have no reason not to ship a small improvement as soon as they could. It also means that it's in the company's best interest to stay as current and up to date as possible. Right now, if I move from Windows NT 4.0 to Linux, MS loses nothing, since they wouldn't be getting anything from me unless I upgraded anyway. But if they're getting a monthly check, they'd damn well better keep me happy.

[ Parent ]
Can anyone say "service bureau"? (4.14 / 7) (#4)
by fossilcode on Wed Feb 14, 2001 at 11:18:15 PM EST

The whole .NET initiative and the ASP model in general looks like a dusted-off version of the old service bureau and time-share model, where you contract a third party company to host your applications and data and you pay (through the nose) for the priviledge of access.

Companies continue to play this game of outsourcing and insourcing as a way to contain costs. Outsourcing in any form is a way to attempt to reduce staff costs and hardware overhead you incur when you try to meet all your computing needs yourself. Insourcing is the backlash that occurs when management realizes they can't get new features, can't get bugs fixed, and can't meet production deadlines.


--
"...half the world blows and half the world sucks." Uh, which half were you again?
Apologies (2.50 / 4) (#8)
by Phage on Wed Feb 14, 2001 at 11:28:04 PM EST

Missed your post while typing mine above.

As someone who used to work in a bureau (Honeywell, VAX), it is interesting to see the whole sorry saga start again.

Personally, my vote has always been to develop your own staff in-house as much as possible. This keeps your staff happier, and maintains the intellectual capital of the business.

I thought that the orginal posters statement comparing .Net to outsourcing and a crack habit to be spot on the mark.


I don't find Heathens to be sexy, as a general rule.
Canthros
[ Parent ]

Poll Comment: "Choice" (3.25 / 4) (#5)
by flieghund on Wed Feb 14, 2001 at 11:19:37 PM EST

My OS of choice? BeOS all the way! On my dinky PII/400, it takes only 15 seconds from power-on to play-time -- and over half of that is the POST/BIOS/RAM/SCSI test crap. A nice, sleek GUI with a powerful CLI back-end... mmm!!!

Now, what do I live with? Win2k at work (IMHO best Windows yet, only BSODs are when I try to burn more than 2 CDs in a row :-/). Win98 at home -- though it triple-boots with BeOS 4.5 and Debian (not sure which kernel -- 2.2? 2.1? Whatever, it works, which is more than my good buddy can claim ;-). If I could get my cable modem to stop crapping out* after 30 minutes of being in anything other than Win98, I'd probably spend most of my time in Be. Alas, Win98 it remains, with its random system hangs and 3-minute boot time...

* As in, stops working for a few _days_. Very annoying.



Using a Macintosh is like picking your nose: everyone likes to do it, but no one will admit to it.
Wow... (2.50 / 2) (#12)
by xriso on Thu Feb 15, 2001 at 12:20:45 AM EST

You must reboot a lot to appreciate small bootup times so much.

And here I was thinking that BeOS was stable.

;-)
--
*** Quits: xriso:#kuro5hin (Forever)
[ Parent ]

Well... (3.00 / 1) (#20)
by flieghund on Thu Feb 15, 2001 at 10:28:42 AM EST

My machine was a e-Machines knock-off that I picked up on clearance sale for half of what comparable Dell computers were going for. But I got what I paid for -- the sound card died within 18 months, the AGP port is "loose" (causing the video card to wiggle out of its socket, despite being secured with the mounting screw), I have four expansion bays but only three power connectors (easily solved, but still...), the CD-ROM and Win98 decided they wouldn't play nice together anymore (though it still worked fine in Be and linux), and I had to manually install the USB connectors because the case didn't include them even though the motherboard did. Oh, and the CPU cooling fan is dying, to the point that it randomly stops spinning, causing my case to overheat. I'm paranoid about that kind of thing, so I shut down my computer whenever I leave my apartment for more than an hour or so.

Also, I live in California. Even though I'm a DWP customer, I figure every little bit helps, so I pretty much power down everything non-essential during the day. Hence, I get to reboot every day.



Using a Macintosh is like picking your nose: everyone likes to do it, but no one will admit to it.
[ Parent ]
Precisely (2.66 / 6) (#7)
by Phage on Wed Feb 14, 2001 at 11:21:30 PM EST

A BIG +1 from me !

Speaking as an elderly biz person, it scares the crap out of me.

However, be aware that MS will probably get away with this due to their >90% market share. This, coupled with the fact that businesses are familiar with these statements already.
They are identical to those used for the benefits of outsourcing. Unfortunately, as we well know, this has not yet shown any benefits to the client at all. (A good argument for irreperable (sp?) harm could be made however. Refer to this article, amongst many others.)


I don't find Heathens to be sexy, as a general rule.
Canthros

A monthly software bill is a good thing... (2.50 / 4) (#9)
by tetrad on Wed Feb 14, 2001 at 11:34:15 PM EST

...if it's cheaper or more convenient than owning the software.

There's nothing wrong with leasing. Just about everything that you could own can be leased and there's no reason why software should be different. The "leasing model" has been successful and useful in the past for other things like homes, offices, cars, computer hardware, furniture, etc -- the list goes on and on. Heck, even software leasing is not new.

People lease for a myriad of reasons. Sometimes its cheaper to rent, sometimes its more convenient, sometimes it offers more features/possibilities. Obviously leasing is not always these things, but it is misguided to suggest that software leasing is bad simply because there are recurring charges. It depends entirely on what the charges are every month and how they stack up against the costs of owning the software. Owning software (even free software) isn't always free after the initial purchase. Yeah, you might not be paying the manufacturer every month, but there are a slew of potential costs resulting from support, maintenance, and other factors.

You predict that Microsoft leasing its OS or Office suite will be the cause of "widespread financial misery". This is blantant Redmond bashing (not that there's anything wrong with that), especially considering you have no idea what the price for this service would be. (Do you?) If Office costs $299/yr, I think we'd agree that would be expensive. If it costs $3/yr,... explain to me again what the issue is? You can go ahead and believe the worst about Microsoft, but the fact that MS is a sometimes-monopolist doesn't necessarily prove that leasing is a Bad Thing.

A disclaimer: I work for a company that is implementing an ASP (application service provider) business model. We're pretty proud of the fact that our service is a whole lot cheaper than owning the expensive software currently used throughout our industry. Yeah, we hope to create never ending revenue streams. But that doesn't make us evil. We -- and our customers -- are convinced that leasing is a great thing that allows for major costs savings. YMMV.

tetrad

You might not believe this (4.60 / 5) (#11)
by onyxruby on Thu Feb 15, 2001 at 12:03:59 AM EST

You might not believe this but I also used to work for a company that leased it's software out to clients. They had a model where you could "buy" it, but that was getting phased out. I sat in on some of the board meetings where they were discussing the transition to a totally leased environment. Let's just say that the customer was not the priority. It's not that the leasing business model is bad, as long as it remains an option for people. I certainly agree with you that there are situations where it make perfect financial sense. My concern is when the leasing business model becomes the only model.

As for pricing, a friend of mine has a connection with MS. What I understand through the grapevine on the leased stuff is that initial cost would be roughly 1/3rd full purchase price followed by a similiar cost for each following year. It isn't the recurring charges that have me worried, it's everything else that goes with it. Having someone license check your entire network daily, and more to the point, controlling your data are larger concerns. It is also not uncommon in such arrangements that the leasor company owns the data, and does not have to allow you to access it if you leave their system.

I certainly won't suggest that free software is without cost. Your Total Cost of Ownership includes things like the expertise to run it, troubleshoot it, and adapt it - not cheap. However free software is not going to lock you into an arrangement where someone's got your company on financial puppet strings. Another thought on leasing. My sister is about to end the lease on her truck she has had for the last 3 years. Once this is done, she is going to have no equity in her truck at all. She must start over from scratch on her car situation.

The moon is covered with the results of astronomical odds.
[ Parent ]

Imagine (2.85 / 7) (#14)
by Phage on Thu Feb 15, 2001 at 01:03:51 AM EST

The poor bloody SoHo user who cannot boot beacuse he didn't pay his dial-up bill, or the ISP's modems are engaged.

The ASP model can work for business, (although I cannot imagine why you would want to) but I do not believe that it is remotely feasible for SoHo users of Office and Windows products.

I have to say, that if this becomes the norm, I will be changing to an 'X' based OS and office suite - toute suite !

Couldn't resist....sorry about that.


I don't find Heathens to be sexy, as a general rule.
Canthros
[ Parent ]

Well, at least you put in the disclaimer... (4.00 / 4) (#21)
by Rasvar on Thu Feb 15, 2001 at 11:20:12 AM EST

Leasing has it's benefits. I see more benfit for a small business than any other. A large fortune 500 company would be foolish to go with this method. Now if they want to buy a full ASP style system and run it themselves, that would make sense. I think ASP has its place. I think home usage of ASP service would be pretty clunky. I wouldn't do it. I do not support leasing as an only option and will be ticked off it it comes down to that becuase I think the actual benefit is very limited to a select group. Note: I am only talking about the most basic aspect of ASP. Security, hosting ability, SLA's and upgrade schedules are a whole other set of issues.

[ Parent ]
Legal rights to reverse engineer. (3.80 / 5) (#15)
by Holloway on Thu Feb 15, 2001 at 01:18:29 AM EST

Does anyone know the legal implications for renting software instead of buying it? Especially for reverse engineering and fair use. It's just not something I've seen discussed.

Ok, ta!


== Human's wear pants, if they don't wear pants they stand out in a crowd. But if a monkey didn't wear pants it would be anonymous

Something similar happened with my company (3.40 / 5) (#16)
by Corwin on Thu Feb 15, 2001 at 01:53:00 AM EST

The place that I worked at had something similar go through a while ago. They decided that they wanted all of their IT support to be provided by a third party. I don't really understand the logic of why, but nonetheless, this is what they wanted. They were leaning towards a big-name company (it was either Cisco or IBM, I want to say Cisco but they probably wouldn't do this) to provide everything, from network design and maintenance to server administration to desktop support. The whole nine yards.

Then they mentioned that they wanted to host all of the servers at a centralized server farm in one of their installations.

Across the border. In another country. (The US. I'm in Canada)

We never heard from them again. Even the PHBs knew how crazy that was.

Not exactly leased service, but we would have been getting all of our data and server applications from another company. Pretty darn close to subscription of service, really, since we would have still been paying them stupid amounts of money on a monthly basis.

---
I'm in search of myself. Have you seen me anywhere?
Could be a good strategy (none / 0) (#27)
by tchaika on Thu Feb 15, 2001 at 05:51:29 PM EST

Freeing up a company from the distraction of keeping non-strategic departments going, allows them to focus on their strategic goals (i.e. doing what they do all day, not compromised by having to worry about an IT department). However as you describe, this scenario is very difficult and risky to implement well.

[ Parent ]
leasing of physical objects (3.80 / 5) (#17)
by streetlawyer on Thu Feb 15, 2001 at 03:00:56 AM EST

There's a lot of talk in this thread about the leasing of physical objects, so I'll just point out here that almost invariably, leasing transactions of that kind are tax-driven; a finance company is usually in a better position to make use of the tax depreciation allowances on a piece of capital equipment or a building than its customers. Since software costs are typically not capitalised and therefore have no tax depreciation schedule, this rationale for leasing doesn't apply.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
Your growth and their depreciation (3.75 / 4) (#18)
by slaytanic killer on Thu Feb 15, 2001 at 07:01:08 AM EST

There are two factors that spring to mind in discussions like this.

. Growth. Companies often want to grow as quickly as manageable (raising share worth), and so the theory is that money now is more valuable than money later. You expect to make more money in the future, and so the same fixed price next year should become cheaper in your eyes since you're richer. If it is not, then you've already failed in your objective regardless of your choice.

. Depreciating goods are better to lease. Dell allows you to lease computers for 2-3 years, at which point it goes back to the factory, or you can pay its value to keep. Is this an intelligent choice? Depends on your needs, but in many scenarios it is. Microsoft products also depreciate sharply in value. If you pay an ongoing fee and yet get the latest updates, is it a sensible choice? Depends on your situation. Some PHB's will make the idiotic choice and lease when there is no need, but the difference between a good and bad one has always been their decision-making capabilities. This is just another decision to make a possible mistake on.

Two concerns: (4.25 / 4) (#19)
by error 404 on Thu Feb 15, 2001 at 10:13:54 AM EST

  1. Control of data: As a business owner, I am leery of handing my data (customer lists, financials) over to any third party. Microsoft has a vested interest in respecting the privacy of that data, but still, they aren't me, and they aren't my carefully selected agent. I interviewed several accountants before giving one my financials. I used referrals and interviewed my lawyer before he saw anything sensetive. I am not at all comfortable handing that information over. The fact that it would make Microsoft look bad if they abused the information, and that I might be able to sue them, is not enough to make me comfortable. When my data is on the line, I want strict accountability and oversight. I want to talk to the people handling my data. I want to be able to check up on the people and processes. I can't get that from Microsoft, or, to be fair, any other major software company.
  2. Security: With all the security problems Microsoft has had lately, I certainly don't want those problems to become my problems. Whether Microsoft is unfairly targeted by hackers or weak on security doesn't matter. If they are holding my data and they get hacked, that's my data - my financials, my customer lists, my projections that's being stolen, damaged, or just inaccessible for a while.

..................................
Electrical banana is bound to be the very next phase
- Donovan

Alternatives to help with 1 && 2 (4.00 / 1) (#22)
by TigerBaer on Thu Feb 15, 2001 at 11:32:15 AM EST

I wholly agree that information security is essential these days, and there are many security holes that are exploited on any MS system (even tho with an inexperienced admin, Unix provides just as many security holes). Also, when referring to script kiddies, use the term "crackers", not "hackers". Hackers are intellectuals when it comes to all things CompSci, whereas crackers are 14year-olds who know how to type "warez crackz hackz" in a search engine.

Anyway, what i was going to ask:
Do you know of any small businesses who have begun looking at alternatives to database software? For instance, a very concrete stable and robust database system can be easily setup with mySQL and php and Apache, and will be VERY secure, VERY dynamic, and VERY accessible (can be completely linked with a outside web page, or completely inaccessible from outide the company LAN). This seems to me to be a solution that gets overlooked, despite the fact that most employees know how to use a web page (making hte learning curve very fast) and that this program is far more customizable than any big nasty piece of software. - Just a thought....

[ Parent ]
Apology for the sloppy terminology (3.00 / 1) (#23)
by error 404 on Thu Feb 15, 2001 at 01:55:28 PM EST

DOH! I know better than to call a cracker a hacker.

As to your suggestion about building applications with MySQL, php, and Apache, it seems a very good one to me, as well. I've heard that postgreSQL might be a better choice for the database in some cases.

I'm also looking at the possibility of creating specialized ASPs for small businesses, as an alternative to heavy-duty on-site consulting. That way, all the computer at the shop has to do is run a browser, while most of the real work is done at the ASP site. The things that need to happen frequently (POS processing, for example) can happen on a local Apache server on the same machine. Allows a very small business to keep their computer needs minimal, and keeps the consultant in his own facility most of the time. This differs from letting Microsoft handle it in that the consultant is in a position to build trust, or, failing that, to be replaced.

I'm not a consultant, the client would be the costume shop that my wife and I run. But I am doing a lot of thinking along those lines.
..................................
Electrical banana is bound to be the very next phase
- Donovan

[ Parent ]

Granularity (5.00 / 1) (#25)
by zephiros on Thu Feb 15, 2001 at 04:48:53 PM EST

I'll agree that, from a desktop standpoint, application leasing is a scary prospect. On the backoffice side of the house, however, it can be awfully handy, if applied correctly.

The trick here is that, with distributed applications and modular service providers, businesses have something closer to a cafeteria plan. You can let IBM host your data, Bubba's Imports handle your order fulfillment, MS provide your b2b transaction services, and Andy's Accounting handle your general ledger. If you're extra paranoid, you can pass your transactions through Audrey's Auditing (before sending them on to Bubba). If you think Bubba's system is dropping records, you can always dig through Audrey's transaction logs.

The advantage to ASPs is that they can specialize. Andy can focus on keeping up with the latest tax laws. Audrey can develop a huge disaster recovery plan. Bubba can streamline his warehouse and delivery policies.

The advantage to businesses is that they can outsource tasks without needing to hand over the keys to the castle. True, they have to trust someone with the task, but this isn't substantially different from hiring a new warehouse manager or storing all your accounting data in Fred's Friendly Books v14.2. If the warehouse manager ships 10,000 widgets to Cambodia, you'll be wanting a lawyer. If Fred decides to charge you $1.25m for the FredCrypt to Oracle 8 data transformer, you can wave goodbye to Mr. Legacy Data.

Personally, on the enterprise side, I think the trend toward leased applications/services is a huge boon. While it may carry some of the trappings of timeshare, proper implementation sidesteps the classic problem of locking your entire IT structure into one vendor.
 
Kuro5hin is full of mostly freaks and hostile lunatics - KTB
[ Parent ]

Cocaine? (3.00 / 1) (#26)
by tchaika on Thu Feb 15, 2001 at 05:49:04 PM EST

Sorry, I nearly didn't read past the part where you compared software leasing to cocaine addiction.

Second, so what if PHB can save money by slashing IT headcount. IT staffers are no more entitled to a job that can be successfully automated than anyone else.

If you want to make an argument that will contribute positiviely to the state of things, and do other than preach to the converted, this is not the way to do it.

My last M$ purchase... (none / 0) (#28)
by kagaku_ninja on Thu Feb 15, 2001 at 09:28:38 PM EST

...was the service package, sold as a major OS revision, called Windows 98SE. I may install a later version of the OS, if I can borrow one (as long as it doesn't require product registration). M$ has been milking their OS monopoly for several years, things are only going to get worse once they place the final brick in the wall.

It has been clear quite some time that M$ is moving to a leased model. When you add in the lastest news about signed drivers and apps, intellectual property protection schemes, and .NET rumors, the situation is looking grave indeed...

I'm going to have to knuckle down, and figure out the missing pieces of my aborted Debian install (networking to my DSL modem). I don't know what I will do about gaming; I know my 98SE system will work for a few more years, but then what?

Leased World | 28 comments (23 topical, 5 editorial, 0 hidden)
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