It’s because the hot idea in business right now is rental models for everything.
If your business plan doesn’t have a way to lock customers in and force them to keep paying forever, then no investor is going to look at it.
Software is subscription, infrastructure is subscription. Hell, your own data is probably subscription based these days. Buy a car? Bet your ass it has at least 1 subscription service in it.
I understand some of it tbh. Not the cars. A car is one and done, you manufacture it and you don’t NEED to spend much more after the fact to keep the happy new owner happy. There’s no way servers cost as much to run as they want for their cloud services (e.g remote start via app, unlock via app, etc). Sure there are R&D costs and they’re pretty big, but those usually end when a model comes out, so you can divide it by total cars sold to get how much it is per one car. Before Tesla, cars didn’t really get software updates unless there were major issues.
But I’m starting to understand why the software industry adopted the service model. Having worked for multiple companies doing B2B SaaS… The customers just keep asking for new things. Does a meal planning app need to be a subscription service? Probably not. But anything that keeps on adding new features costs a lot of money. Software engineers aren’t cheap.
Of course my view may be skewed because it’s B2B, not software anyone would just download off an app store or website. At my different jobs we’ve had billion dollar companies come and say “we love what you’re doing, we want to keep using it, but you have to do X, Y and Z or our workflow just won’t work and we can’t use it efficiently”.
Also in the world of consumer facing software, nobody wants a big upfront payment, but people are more willing to stomach a small monthly subscription. We could do away with proprietary software altogether, but oftentimes what happens with open source software is that due to lack of funding, devs don’t have enough time to work on things, and they lag behind proprietary offerings. Large software suites like Adobe Premiere are never “finished” and thus neither are the open source alternatives. But Adobe has a ton more engineering resources to throw at improving their product than most open source projects.
TL;DR: Software engineering is expensive. People working open source projects are often doing it in their spare time after the work that actually pays their bills. If you want free and open source software to be competitive to paid subscription software, you gotta set up recurring donations and convince other people to do the same. At least it’ll be forkable, voluntary and democratic, unlike with proprietary software companies.
also in the world of consumer facing software, nobody wants a big upfront payment
I think this is a much bigger thing than people realize. Like it’s all great to say “I would pay much more for a one time payment”, but when it actually comes down to it most people won’t.
Look at something like Plex, they offer both a subscription as well as a one time purchase. But in 2023 (the newest data I could find) the subscriptions make up 84% of Plex’s entire revenue stream. And the plex lifetime subscription really isn’t that bad either, it’s only $120 and it’s supposed to go up to only (I know how y’all feel about it being “only”, I don’t care) $250 at the end of April. It’s really not that expensive for a lifetime cost.
Even before subscriptions became normalised cars had a support cost, parts and servicing, especially for genuine or genuine reconditioned parts.
Strictly speaking, you can avoid the dealers and the part costs by working with mechanics, wreckers or aftermarket manufacturers but those have extra costs and voided warranties.
Parts sales are a major income stream for manufacturers, especially as they need to compete on car sales, but once you’re locked in on that car they mark up the prices on the parts long term.
Though admittedly enshittification means worse and more expensive parts and legal threats to aftermarket manufacturers.
One of the driving forces behind this phenomena is that business types value having that reoccurring revenue on the books more than “normal” revenue. If you have two companies with identical revenue but one of them gets it from customers locked in on a subscription, that company will be valued significantly higher. If you’re an exec or a big investor who owns a lot of stock in a company then you’re effectively incentivized to push the company towards that subscription based reoccurring revenue model because it will boost the stock price and make you richer.
I was talking about this with my friend the other day. I was looking for car insurance right. I went to Geico and I was just about ready to lock in to a plan for 1000$. I had a question I needed answered so I went to support. What I got was a worthless chatbot that ended up costing Geico my business. I was so displeased I ended up going to progressive.
But that begs the question: do Geico executives make more money off the increased stock valuation that comes from implementing a chatbot despite losing my real, cash business?
Easy to measure (support manpower costs) vs hard to measure (business lost due to bad support).
Good engineering (and old fashioned business practices) would try to better measure the hard to measure stuff (for example using surveys).
Modern MBA business practices just uses the easy to measure stuff as guidelines and doesn’t even try to measure the rest, possibly because “if we don’t officially know it then I can’t be blamed for it”.
Mind you, maybe they’re right since most consumers get shafted and still keep on coming back for more.
It’s because the hot idea in business right now is rental models for everything.
If your business plan doesn’t have a way to lock customers in and force them to keep paying forever, then no investor is going to look at it.
Software is subscription, infrastructure is subscription. Hell, your own data is probably subscription based these days. Buy a car? Bet your ass it has at least 1 subscription service in it.
I understand some of it tbh. Not the cars. A car is one and done, you manufacture it and you don’t NEED to spend much more after the fact to keep the happy new owner happy. There’s no way servers cost as much to run as they want for their cloud services (e.g remote start via app, unlock via app, etc). Sure there are R&D costs and they’re pretty big, but those usually end when a model comes out, so you can divide it by total cars sold to get how much it is per one car. Before Tesla, cars didn’t really get software updates unless there were major issues.
But I’m starting to understand why the software industry adopted the service model. Having worked for multiple companies doing B2B SaaS… The customers just keep asking for new things. Does a meal planning app need to be a subscription service? Probably not. But anything that keeps on adding new features costs a lot of money. Software engineers aren’t cheap.
Of course my view may be skewed because it’s B2B, not software anyone would just download off an app store or website. At my different jobs we’ve had billion dollar companies come and say “we love what you’re doing, we want to keep using it, but you have to do X, Y and Z or our workflow just won’t work and we can’t use it efficiently”.
Also in the world of consumer facing software, nobody wants a big upfront payment, but people are more willing to stomach a small monthly subscription. We could do away with proprietary software altogether, but oftentimes what happens with open source software is that due to lack of funding, devs don’t have enough time to work on things, and they lag behind proprietary offerings. Large software suites like Adobe Premiere are never “finished” and thus neither are the open source alternatives. But Adobe has a ton more engineering resources to throw at improving their product than most open source projects.
TL;DR: Software engineering is expensive. People working open source projects are often doing it in their spare time after the work that actually pays their bills. If you want free and open source software to be competitive to paid subscription software, you gotta set up recurring donations and convince other people to do the same. At least it’ll be forkable, voluntary and democratic, unlike with proprietary software companies.
I think this is a much bigger thing than people realize. Like it’s all great to say “I would pay much more for a one time payment”, but when it actually comes down to it most people won’t.
Look at something like Plex, they offer both a subscription as well as a one time purchase. But in 2023 (the newest data I could find) the subscriptions make up 84% of Plex’s entire revenue stream. And the plex lifetime subscription really isn’t that bad either, it’s only $120 and it’s supposed to go up to only (I know how y’all feel about it being “only”, I don’t care) $250 at the end of April. It’s really not that expensive for a lifetime cost.
Even before subscriptions became normalised cars had a support cost, parts and servicing, especially for genuine or genuine reconditioned parts.
Strictly speaking, you can avoid the dealers and the part costs by working with mechanics, wreckers or aftermarket manufacturers but those have extra costs and voided warranties.
Parts sales are a major income stream for manufacturers, especially as they need to compete on car sales, but once you’re locked in on that car they mark up the prices on the parts long term.
Though admittedly enshittification means worse and more expensive parts and legal threats to aftermarket manufacturers.
One of the driving forces behind this phenomena is that business types value having that reoccurring revenue on the books more than “normal” revenue. If you have two companies with identical revenue but one of them gets it from customers locked in on a subscription, that company will be valued significantly higher. If you’re an exec or a big investor who owns a lot of stock in a company then you’re effectively incentivized to push the company towards that subscription based reoccurring revenue model because it will boost the stock price and make you richer.
I was talking about this with my friend the other day. I was looking for car insurance right. I went to Geico and I was just about ready to lock in to a plan for 1000$. I had a question I needed answered so I went to support. What I got was a worthless chatbot that ended up costing Geico my business. I was so displeased I ended up going to progressive.
But that begs the question: do Geico executives make more money off the increased stock valuation that comes from implementing a chatbot despite losing my real, cash business?
Easy to measure (support manpower costs) vs hard to measure (business lost due to bad support).
Good engineering (and old fashioned business practices) would try to better measure the hard to measure stuff (for example using surveys).
Modern MBA business practices just uses the easy to measure stuff as guidelines and doesn’t even try to measure the rest, possibly because “if we don’t officially know it then I can’t be blamed for it”.
Mind you, maybe they’re right since most consumers get shafted and still keep on coming back for more.