Dennis Howlett, the AccMan Pro, wrote a very good post on "The Fallacy of Packaged Application Ownership," making the point that buying software really just means that you have the right to use. A software license never conveys ownership. In fact the packaged software market goes a long way out of their way to let you know that. He goes on: The traditional packaged application sales model where you pay a large upfront license fee and then periodically upgrade is predicated in part on the perception that once you acquire the license, you somehow ‘own’ the software. Wrong. You never own the software but a right to use. You find that out when incumbents force upgrades by withdrawing support for earlier versions. That happened in the 1990s when MICL (as it was then) withdrew support for Finax Companies Act formats for accounts prep in favour of Viztopia. All software vendors do this eventually. (And yes, I know vendors will argue extra features justify the upgrade cost when in truth they need the upgrade and maintenance fees to remain in business.)
I couldn't agree more with his commentary. And I hope that SaaS vendors like NetSuite are listening, because there will come a day when they must stop delivering new functionality and raising the price accordingly. Sometimes it irks me a bit that some of NetSuite's functionality is sold through add-ons but this really does make sense when you think about it. As they move to increase revenues from the current list of customers, and from new customers, they must add new functions, probably some for special verticals. As this happens it will be important for companies to choose what functions they really want, and really want to pay for. Howlett puts it like this: The incumbent model has run out of steam. Accounting apps that have lasted this long, like Sage Line x, SunAccounts, AccessAccounts and so on are bursting with functionality I defy any company to fully implement. Any further upgrades are largely irrelevant because all the important parts of the accounting jigsaw are in place. But if you’re locked in then what happens next? If you look at how Sage (for example) is moving forward it encourages the continued payment of maintenance fees with the promise of new applications.
SaaS vendors are somewhat shielded from the need to issue upgrades and take new maintenance fees. However the advantage that they have, the annuity they develop from the customer population purchasing an annual subscription plus support, also has the downside of locking the vendor into a revenue ceiling if they are not careful. How they continue to grow the business once they start approaching the ceiling remains to be seen. But simply raising prices every year with the marketing team cheering on the latest new functionality it not going to cut it any more than the traditional software vendor asking for new maintenance fees. The answer must come in the form of new market partnerships. This is where a company like Jamcracker come in. More tomorrow. | 
