Perhaps it’s because I’ve been reading Behind the Cloud, Mark Benioff’s story of how Salesforce.com “define[d] itself as the leader of the cloud computing revolution and spark[ed] a 46 billion-dollar industry,” but lately I’ve been looking forward to the day when everybody embraces the software-as-a-service model, more commonly known as SaaS, cloud computing, or software on demand.
For instance: Adobe, makers of such programs as Photoshop, Flash, and Reader. I use several of their products at work, but since switching to a Mac several years ago, I’ve had to do without at home. Admittedly, even if I had a PC I’d be hopelessly out of date – I bought my copy of Photoshop 8 years ago. And, honestly, I’d gotten to the point that I wasn’t using it enough to justify buying it again – but every so often you get a project that Word isn’t quite sufficient for – creating a really exciting resume, laying out a friend’s engagement party invitations – and miss it desperately.
Adobe has just released Creative Suite 5 (CS5), a bundle of all their programs for the bargain basement price of $2599. Buy that, and you’ll be afflicted with an inferiority complex when they release CS6 in two or three years.
And that’s when it hit me. Adobe Creative Suite as Saas, paid for as a monthly subscription and accessed online.
Let’s be optimistic (from their perspective) and suppose a new release every 2 years. At $2599, that works out to $108/month. But then, suppose they charged by the program – 15 programs – that’s only $7/month for each. I don’t say they wouldn’t play with the pricing a little to compensate for the less popular programs – and I’d pay $15, easily, for a month’s access to Photoshop or InDesign – but let’s look at the benefits:
- The cult of the new and shiny is eternally satisfied (Salesforce puts out small fixes every six weeks or so and bigger version releases every three months)
- Those of us who hate the “waste” of software upgrades are satisfied, because there’s only one always-current version.
- Adobe comes out ahead. Suppose on their current schedule the releases are closer to three years apart. Under that model, the obsessive-updaters are paying $2599 over 36 months. Under the SaaS model, because they’re paying at the 2-year price calculation, they’ve paid $3898 in the same amount of time. And the people who wouldn’t have upgraded until it became absolutely necessary are paying just as much.
- Adobe gains new customers. Because of the low, low barrier to entry, more people will use their services – especially if Adobe followed the Netflix model of allowing you to “pause” your account when you know you won’t have a need for their service. The $1500 necessary to get the minimum capabilities I would need is way out of my reach. They’re not going to get that no matter how much I’d like to give it to them. But they’d get a few bucks out of me here and there, which is better than nothing, right? There must be a lot of people in the same boat. Plus, I’m sure there are plenty of bored people who would say, “I’ve always heard about this Photoshop thing – I think I’ll try it and see what all the fuss is about,” who would never have invested $600. Maybe it takes, maybe it doesn’t. But every time it “takes,” Adobe has just gained a customer of incredible lifetime value (see #3).
I’m not Salesforce’s all-time biggest fan, although I would like to be, but the industry and model they pioneered? Yeah, I’m sold.