Microsoft (NASDAQ: MSFT) wants to expand the reach of its vital Office suite of products. The software giant wants to utilize a subscription model for the collection of programs. The initiative will commence later this month at Circuit City (NYSE: CC) and it will eventually reach other retail stores. People will also eventually have the option of accessing the subscription product via computers such as ones made by Dell (NASDAQ: DELL). The cost is reported to be $70 for twelve months of Office access.
This is an interesting scheme. As the article points out, businesses might not bat an eye at subscribing to software applications, but for consumers, this is a different ballgame. Many of us, myself included, are so used to going down to a Best Buy (NYSE: BBY) to purchase a software package for a flat fee that paying yearly dues just seems like an alien concept. And I'd say this goes double for something as large and complex as the Office program. Microsoft believes that $70 on an annual basis will be perceived as cheap and will expose consumers who might normally either seek upgrades on a pirated basis or who would simply continue using older versions to regular approved updates. It is a large investment, after all, to upgrade to a new iteration of Office.
Microsoft would be wise to market the heck out of the subscription model for Office, taking full advantage of the inflationary environment we are currently in. If potential users can be convinced of the value proposition, then they could eventually become hooked on the promise of upgrades over time for the relatively economical price indicated. Checking around on the net, I notice that a lot of the negative comments about this idea center on the fact that there are already free alternatives out there to Office, such as applications offered by Google (NASDAQ: GOOG).
The thing is, though, many mainstream users of software applications probably are susceptible to the brand equity of Microsoft and Office. I am. Quite honestly, I'd rather use something used by the majority of people I know and work with as opposed to a free suite on Google or elsewhere. Sure, savvy software users will make fun of me for holding such an opinion and will point out a perceived lack of sophistication on my part, but my point is that, from a business standpoint, Microsoft does have a ton of equity to leverage in the form of the Office name, and it's a worthwhile goal to invest a little capital toward converting some of the mindshare out there who don't currently engage Office upgrades into subscribing users. Incremental revenues may result over time if an effective marketing campaign is drawn up. I don't think I'd subscribe, but I have a feeling others might...
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
7-04-2008 @ 4:26PM
Lewin Edwards said...
This tired old "bring back the NC under another name" concept has numerous flaws, and really the biggest one isn't the vague "consumers aren't used to it" idea you bring up. The BIG issue is... what happens when I stop paying the dues? I'm locked out of my own documents because the only software that can read the [proprietary] document format is the subscribeware application that I don't want to use. Once you buy into that nightmare, you basically signed over $70 a year (plus inflation) for the rest of your life if you require access to your OWN historical data.
Software subscriptions that potentially lock you out of your data are fundamentally flawed. This is the same reason that cloud computing, where the primary data repository is the cloud, is also a bad idea - stop feeding money into the cloud and your data evaporates.
8-05-2008 @ 10:53PM
Chuck Clark said...
We prefer Open Office over anything Microsoft, because Open Office is more advanced than anything Microsoft can offer and available free of charge with tons more add ons available than Microsoft could ever offer. Microsoft's problems with its products result not from any payment model, but from the fact that all Microsoft products are inherently defective, requiring endless updates and security patches. If and when Microsoft could ever develop safe and reliable software we would of course consider using their products. And using a program simply because friends are using it seems quite silly to us, as business owners, because we are in business to make a profit, not make friends, and we are leaders not followers. Just as we would not go jump off a cliff just because some friends did, we would not use anything Microsoft simply because some friends did. Have your friends change away from Office.