For months Microsoft has been describing Windows 10 "as a service" and now we know why. Microsoft is going to introduce a monthly sub- scription fee for Windows 10 usage.
That cost will be $7 per user per month but the good news is it only applies to enterprises, for now. The new pricing tier will be called "Windows 10 Enterprise E3" and it means Windows has finally joined Office 365 and Azure as a subscription service.
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- - Bill Horne
***** Moderator's Note *****
If M$ gets away with this, every CEO that ever sold an app for a cellphone will be salivating at the thought of getting that annuity.
"Gets away"? That's the normal way most enterprise applications have been offered for ages, not to mention most historic enterprise operating systems dating back to the IBM 360 and beyond. Enterprises are perfectly willing to accept predictable, periodic operating expenses for things that they would otherwise have to make periodic large capital expenditures on -- leasing software is no different from leasing equipment, cars, or office space as far as the accountants are concerned.
Actually, up to and including System/360, operating system software and application programs were available for free; they were bundled with the purchase price of the hardware.
In the System/370 years, IBM unbundled the software from its hardware. For some programs, users continued with the IBM program, but in others independent software houses sprang up and developed competing programs. Examples include SYNCSORT and various database management systems.
In any event, there are big differences between operating systems for a PC and a mainframe. (1) The mainframe programs are far more complex and need to be far more reliable. The frequent crashes of Windows or I/E would never be tolerated in a mainframe environment. (2) Many, many more copies of PC software are sold as compared to the mainframe, so the cost of development is spread over far more customers. (3) Historically, PC operating systems have been sold as part of the hardware, and as a relatively minor cost to it.
I'm not sure of M/S pricing plans to "lease" software, but my experience is that a price of $20 per year would be reasonable.
Another problem that needs to be addressed is that forced obsolescence of older software. Someone who owns Windows XP and other 10-20 year old M/S products will find that they simply don't work anymore, especially in shared applications. No backward compatibility. Users are _forced_ to buy new software.
If someone is driving a 20 year old car, as many people do, they can continue to drive it as long as it mechanically holds up. No one is told their _working_ vehicle is "obsolete" and not allowed on the roads anymore. But with PC's, people are forced to discard older software and hardware. That's wrong.
It should be noted that IBM provides backward compatibility for its software and hardware. There were customers running 1960-era programs as late as 2000 (maybe even later). It was called
1401/7090 emulation. Also, application programs written 30-40 years ago run fine today. So, if we're gonna make comparisons to the mainframe world, we need to include these features, too. In the PC world, MS-DOS programs won't work anymore without a tedious restructure of the PC.
Switching to compatibility of the telephone industry, new switches would support older customer telephone sets and systems, such as old key systems and PBX's. My landline still supports my rotary dial phones. I bet the carriers would love for landline customers to run out and buy digital phones so they could modernize their networks, but at least for the moment, old equipment is still supported.
***** Moderator's Note *****
What "digital phones" are available for purchase? Do you mean ISDN?
That's true, but it doesn't refute Garrett's observation. That unbundling occurred in almost half a century ago; as Wikipedia notes:
"In 1969 IBM 'unbundled' software and services from hardware sales. Until this time customers did not pay for software or services separately from the very high price for leasing the hardware."
In fact, until the 1956 consent decree, leasing was the *only* way for customers to access IBM hardware (and thus, the bundled software). That agreement with the Justice Department gave customers the option of purchasing outright instead of leasing. But even after that, many enterprises preferred to stick to leasing's "predictable, periodic operating expenses" model that Garrett mentioned. When the software industry took off after the unbundling decision thirteen years later, many businesses applied the same logic when making their buy vs. sub- scribe decisions about software. Heck, my wife's employer is the world's largest privately-held software firm, and virtually their entire revenue stream comes from software subscriptions and associated services, not one-time sales. So Microsoft will hardly be blazing a trail by offering Windows 10 Enterprise as a subscription-based service. The large companies that use Windows 10 Enterprise (which, remember, is not a consumer-level product) are already used to that pricing model for all sorts of other enterprise software they use.
Bob Goudreau Cary, NC
***** Moderator's Note *****
Nobody ever got fired for buy^h^h^h leas^h^h^h^h subscribing to IB^h^h Microsoft?
But the key issue here is that businesses want to _choose_ for themselves whether to lease or purchase, not having [the choice] forced on them as M/S apparently is doing. For some business, for a variety of reasons, leasing is better, for others, purchase is better. (Just as some businesses choose to purchase the buildings they occupy while others lease them.)
We must note that lease vs. purchase was a major motivator in the Bell System breakup. Until then, all Bell System customers had to lease almost all communications products from Bell. Many resented that, and would've preferred to purchase and handle their own maintenance, or have purchased gear from a separate vendor. The big issue was [that] customers wanted to choose for themselves.
As for IBM, after unbundling, IBM customers had three general choices: lease from IBM, purchase from IBM, or lease from a third party vendor. Each approach had pros and cons. But prices were reduced.
I don't know who your wife's employer is, but I must respectfully disagree. I do know that in the mainframe world, many once independent vendors were bought out by a large company which now has a near monopoly on independent mainframe software. Why this isn't an anti-trust issue I don't know--it sure seems like it is. Anyway, many of the software products are stable and haven't been advanced in decades, but are still used by mainframe customers. None the less, the prices charged for them are extremely high-- thousands of dollars per year. Seems to me that a functionally stabilized product should have a modest lease charge.
Worse than that (until the Carterphone decision), for the equipment they did own and connect to the Bell system, they were required to lease a "protective device" to isolate the "dangerous" device from the system. The cost of the lease for that device mostly killed the advantage of the non-Bell equipment.
You gave the reason yourself. They charge those prices because they can. They maintain a monopoly by buying up the competition.
CA bought up both tape-management systems: TMS and TLMS. The company I worked for had TMS. When I called tech support, I would speak to the author. It seems he was the only TMS tech retained (though it made some sense: TLMS really was the far better system). The monthly price for TMS was no bargain; it didn't reflect in any way the low cost to CA. Eventually, we changed to TLMS - about the same price and better capability.
Just as a commercial real estate landlord is under no obligation to sell its property instead of renting it out to tenants, a commercial software provider is under no obligation (absent government coercion) to sell its wares instead of offering them as a subscription-based service. No doubt some potential customers would prefer to buy instead of rent/subscribe, and they would probably even prefer a purchase cost of $0 if they had their druthers. But it's not their property, so they don't get to set the terms. If they don't like the terms that the owner is offering, they are free to decline the offer and take their business elsewhere. If you prefer not to use Windows 10 Enterprise, alternatives include a vast ecosystem of companies offering Linux-based enterprise solutions, for example.
I'm not sure which statement you're disagreeing with. For the record, my wife works at SAS Institute Inc., which is well documented as the largest privately held software company, and which earns most of its revenue from licensing (not selling) its software to customers. If you're taking issue with my statement that "the large companies that use Windows 10 Enterprise... are already used to that pricing model for all sorts of other enterprise software they use", then you seem to have agreed with, not refuted, that point with your observation about yearly lease charges for mainframe software.
So to sum up:
Mr. Horne implied that the prospect of MS licensing some of its enterprise software on a subscription basis was some sort of new and iconoclastic development. Garrett Wollman demonstrated that, on the contrary, it has been a common business model for many decades. It's hardly surprising that a company striving to increase its penetration in the enterprise market would adopt such a proven industry-standard go-to-market approach.
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