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Subscription Based Product Pricing, The Coming Of Age For Software Industry

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Let me scamper off quickly through some of the headlines regarding software in the near past-

1. Adobe launches a subscription based model which starts for as low as Rs. 499 a month in India. Even removing the ‘*’ from the plan, we have the complete Adobe Suite for Rs. 2700 a month for any person interested. This plan will include all future updates and obviously cloud storage.

2. Microsoft launches Office 365 as a subscription based model and guess what it is priced lower than Adobe at Rs. 420 per month. Also, this can be installed on upto 5 PCs and includes Mobile devices. Again, all future updates and cloud storage are included in the package.

3. Microsoft Windows 8 was launched at an introductory price which was much lower than what it commanded later. The catch was that you ought to have Windows 7 beforehand. Also, it was installed without any DVD or other hard media.

4. Apple released its latest Mac OS X at a measly price and was simply updated in your computer. No hard media was required (Pen drive, CD, DVD etc.)

Subscription Based Product pricing-001

Can you see some relation? There are three distinct qualities that are coming out from these news pieces according to me-

First and foremost, the software industries biggest stalwarts are moving online. These companies were traditionally selling their software at a premium price to the consumer where the consumer would go to a shop and buy the necessary hardware to install them. This is no more the case. Everything can be either installed directly from internet or is present on the internet.

Second is the price. It is extremely low compared to what these softwares used to command earlier. Suddenly, these softwares are affordable for a person who would not have thought of doing so before.

Imagine, at a price of less than Rs. 1000 a month, you can now have entire Office and Adobe Suite on your computer. For Office, you can even install it on other computers so the price goes down even further.

Also, the subscription model means that the user is hooked for life. As more content is saved online, the user will be reluctant to move to any other interface. Adding this to the “no hardware scenario”, suddenly we have a piracy tackling method that might actually work.

Third is if you have noticed- No price fluctuation. It is not a conversion of Dollar into Rupees. The price is in the Indian currency. This price is unaffected by the falling of Rupee.

In fact, Adobe has stated that it won’t be changing the price because of the condition of Rupee. This is very interesting as it shows that India is no longer a secondary market as far as software is concerned.

This also means that when you get a subscription model, it won’t mean that every month you are paying something different according to that month’s Dollar to Rupee conversion. There are a few software services that are still doing that but when the behemoth move, the smaller parties follow.

It is also of note that companies are moving in this direction at a quick pace. Adobe and Apple have completely done away with the hardware system while Microsoft is pushing it aggressively. It is selling Office for 5 PCs at Rs. 420 per month or Rs. 4200 a year whereas it is selling the Student version of Office 2013 (1 PC) for Rs. 5500. That is practically sabotaging Office 2013.

I strongly believe this is a coming of age moment for the software industry.

New mechanism of earning revenue are being found, the prices are falling for consumers. The cheap subscription based models are now more lucrative than a single very costly purchase. Apps and cloud are now an integral part of every software suite.

And of course, India is an integral part of that moment and not merely an admirer.

  1. Kunal, thanks for the insightful post. I am still old school and do not like to pay a monthly fee for anything but it sounds like eventually this will be the only way to go. By the way what are we talking about in dollars for these various programs.

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