I have seen huge transformations in my life; I’ll never get tired of telling about the early 8-bit computers of the golden/pioneering age of personal computing (naming them again: VIC-20, Commodore 64, ZX-Spectrum) to the immense computing power of today’s 64-bit RISC-powered MacBook Pro with GPUs. Another big transformation was with TV sets: In the mid-seventies, big and heavy, black, white, and shades of grey only, you had to wait several minutes after pressing the power button to turn it on and for the image to appear, starting as a single dot in the middle of the CRT (Cathode Ray Tube), then expanding as a line and finally growing into a full image – a blurry image at first, then an acceptably sharp one. Now I see flat TVs integrated into the living room furniture that magically disappear when turned off.
Image taken from Fratelli Cutini Mobili Srl website
Another transformation I saw was in software pricing and business models of software houses. Thanks to the internet, the early model of “buy once and use forever” has changed; now software houses are distributing their products with yearly subscriptions: pay as long as you wish to use the software. When you’re tired or no longer need it, no problem – the software magically disappears, and you no longer have to pay.
As a good selling point of this business model, I can say that (some!) software prices have drastically fallen! Just remember the time when Photoshop CS6 cost around $1000 ($999 to be precise), and now Adobe Photography with some gigabytes of cloud storage costs $9.99/month. Adobe Photography is the name of the Photoshop + Lightroom bundle for individuals. 10 dollars per month is a very affordable price for the bunch of code that changed the game of photo post-production!
Adobe, in just one move, wiped out piracy (who would take the risk of getting Photoshop + malware for free to save the cost of breakfast in Zürich? – Yes, Frühstück in Zürich is VERY expensive!), lowered the access barrier for their product, increased their userbase, and… got an eye on the pictures you’re creating (they give you 20GB of space on their cloud! NOTHING is free…), how you create them, which functions you use normally, and they collect telemetry data in real-time.
Let’s talk about another category of software called “IDE”; IDE stands for “Integrated Development Environment.” For non-geeks, I’m talking about the hammer and screwdriver developers use to write and test the software they create. An IDE is usually a good and focused text editor (software is text at the beginning of its life) with some cool features like syntax highlighting (the feature that shows you keywords, variables, and comments with cool and different colors), transforming the text into executable code (the instructions your PC can understand and execute), and finally, some helpful tools to debug (or “inspect and amend” for non-geeks) code under test. I’ll stop here, but there are many more features in IDEs.
When I bought my first IDE at 17 (TML Basic for Apple IIgs), I spent around $170 in the late ‘80s (ChatGPT computed that to be around $430 today). Considering the release rate of software during that period – is it reasonable to expect a release of one major version per year? – I would have had to spend the same amount every year to get my new IDE.
Now JetBrains sells their PyCharm (an IDE for Python) for around $110/year, decreasing every year to $60 after the third year. It’s a nice price, although as an individual, I prefer Visual Studio Code, which is free.
Again, even JetBrains’ software stops working when you stop paying.
Wrap-up: Software house mantras seem to have changed from “pay the huge bill once” to “pay less but always.”
Once again: They zeroed out piracy, lowered the access barrier, increased their selling volumes, and transformed their one-shot-check into a continuous flow of money that can feed software development and give immediate feedback on the real interest in their products.
On the opposite side, we have some online companies that offer services with “lifetime subscriptions.” Who are they? A name that stands out is pCloud (taken as an example, not an endorsement). This personal cloud storage company from Bulgaria (and NOT from Switzerland as they claim – just check out their LinkedIn page to see where all their workforce is based) offers a lifetime subscription for around $220.
Here’s what drives me crazy: Software never stops developing, we all agree, but software houses can develop version 1.0 of their package and that’s it. Initial investment, development of 1.0, selling – period. All developers can be fired or relocated to another project, but this version 1.0 can continue to be sold as long as it satisfies market requirements (or better yet: The requirements of the users). So, a one-shot payment might be okay for a bunch of code.
Personal cloud storage – or even better, online services – has a continuous NEGATIVE cash flow: These companies have infrastructure to run, bills to pay, system engineers to feed, and underlying software to update to avoid cybercrooks! Once they’ve saturated their market, where on earth will they find the money to stay in business?
From where a company really is? Take a look at LinkedIn and see where the workforce is based.
My idea about these “lifetime subscription services” – I’m not talking about pCloud anymore – is that they generate income by compelling users to migrate to more expensive plans as their needs grow (i.e. a user bought a 20GB lifetime plan but now needs 50GB, so they’re forced to buy a new plan), sell users’ data (hello, Google!), or – finally – they are just a business unit of a larger company; the group’s overall budget is positive, even though a single business unit is starving.
All these factors must be considered when people subscribe to an online service – BE VERY CAREFUL when a service is free! Maybe it’s free because they’re a startup, or maybe it’s free because YOU, the customer, are the product! 😉
Finally, let’s talk about the car business, and BMW in particular. This company is offering the iDrive package: for around €30, they offer heated seats and steering wheels – €30 per month! Don’t want to pay? Your back will be chilled again in winter, just like our ancestors!
For sure, there are other companies making real money by selling services on monthly subscriptions. Just think about it, and you’ll get your answers.
Conspiracy theory corner
We’re approaching 2030, where Schwab prophesied, “You will own nothing and you’ll be happy” (and if you’re not, the police will make sure you are!). Everything seems to be moving toward a “life-as-a-service” model. Cars, for example, are one of the durable goods under attack (think about the leasing market: once the lease is over, you switch cars, keep paying, or give the car back and you own nothing). In Switzerland, only a few people can own a house (despite the housing market having grown over the last 20 years).
WEF stay away from me!!!
What’s the model? You pay around 20% of the house value – usually by taking this money from your retirement fund – and take out a loan with a bank. On this loan, you only pay interest, not capital (if you repay the loan, you own your house but have to pay more taxes on it! So it’s worth having just 20% of your house and leaving the remaining 80% to the bank). Want to retire? Try selling the house to others to get your retirement fund back (no longer a lifetime income…) if you can! The housing market is falling in several regions of Switzerland, and people who can afford a house today are not guaranteed that security in the future. Will you still be able to pay the interest to the bank once retired?
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