Renting software sucks | August 15, 2016

Back in the the olden days (c. 2000) people used to own software. When a new version of Photoshop or Fireworks came out, you’d assess the new features to decide whether they were worth the price of the upgrade. If you didn’t like what you saw, you could skip a generation or two, waiting until the company had a more compelling offering.

This gave consumers a certain amount of purchasing power, forcing software providers to constantly tweak their products to win customer favour. Of course, not every tweak worked, but the failures were often as instructive as the successes.

This started to change around 2004, when companies like 37 Signals released Basecamp, their Software as a Service project management tool. The price points were low—maybe only a few dollars a week—reducing the barrier to entry and spreading the cost over a longer period.

Other products quickly followed; accounting tools, invoicing tools, time-tracking tools, prototyping tools, testing tool, analytics tools, design tools. Jump forward to today, and the average freelancer or small design agency could have subscriptions to over a dozen such tools.

Subscription works well for products you use on a daily basis. For designers this could be Photoshop or InVision; for accountants this could be Xero or Float; and for consumers this could be Spotify or Netflix.

Subscription also encourages use—it encourages us to create habits in order to get our money’s worth. Like the free buffet at an all-inclusive hotel, we keep going back for more, even when we’re no longer hungry.

In doing so, subscription also locks us in, making it psychologically harder for us to try alternatives. Making it less likely for us to try that amazing local restaurant because we’ve already paid for our meals and need to beat the system. The sunk cost fallacy in all its glory.

Problems with the rental model become more apparent when you’re forced to rent things you use infrequently, like survey products or recruitment tools. You pay to maintain the opportunity of use, rather than for use itself.

We recently did an audit of all the small monthly payments going out of the company, and it’s amazing how quickly they mount up. Twenty dollars here and forty dollars there can become thousands each year if you’re not careful. Even more amazing are the number of products we barely used. Products that somebody signed up for a few years back and forgot to cancel.

You could blame us for our lack of diligence. However the gym membership model of rental is explicitly designed to elicit this behaviour. To encourage people to rent the opportunity, safe in the knowledge that the majority of members won’t overburden the system. Unclear billing practices and disincentives for unsubscribing—”if you leave you’ll lose all your data”—are designed for this very purpose.

Then you have the legacy tools. Products that you rarely use, but still need access to. Photoshop is a great example of this. Even if you’ve decided to move to Sketch, you know many of your clients still use Photoshop. In the olden days you would have keep an older version on your machine, costing you nothing. These days you need to maintain your Creative Cloud account across multiple team members, costing you thousands of dollars for something you rarely use.

This article was sparked by a recent Twitter storm I witnessed where Sketch users raised the idea of a rental model and vilified people who felt paying $30 a month for professional software (which currently retails at $99) was too much.

While I understand the sentiment—after all Sketch is the tool many designers use to make their living—you can’t take this monthly cost in isolation. Instead you need to calculate lifetime cost. As we all know from the real world, renting is always more expensive than ownership in the long term.

You also have to consider rental costs in relationship to every other piece of rented software our industry considers necessary. With this number continuously increasing—but no sign of legacy tool rental declining—entering the digital industry is becoming an increasingly costly prospect for new designers and developers.

The thing I find strange is that, while we’ve been trained to believe renting is the norm for software over the past 10 years, few of us think this way of physical goods. We mostly still buy houses, cars, computers and music systems, rather than renting or leasing them. Many believe ownership offers some kind of noble status, despite the environmental cost of owning atoms over bits.

When we do rent physical products, it’s rarely on a subscription basis. Instead we’ll rent an apartment in New York through AirBnB for a weekend, a Zipcar for an afternoon or a Tasker for an hour.

I’m not saying software rental is always bad. I’d just like to see more diversity in SaaS business models. I’d welcome the ability to subscribe to mature services I use on a regular basis, but rent less common tools on a per-use basis. I’d also like to retain ownership of certain tools, like Sketch, as I think this is a better model for innovation.

We talk a lot about user-centered design in the digital world. Isn’t it about time we considered business models through the same critical lens?

Posted at August 15, 2016 3:58 PM