Many online businesses still follow the subscription model. It looks like the theory behind it is passive income. You built your idea once, then farm it out to the users on a yearly or monthly fee. Aside from customer support, on the surface it looks appealing.
Flickr, Wufoo, Mad Mimi and even Paypal uses a variant of the subscription model. Lynda.com and Basecamp both use a subscription model, but in their rare cases it benefits the customer. These services could be sold piecemeal, if the companies wanted to charge that way. A customer could buy a specific set of lessons through Lynda.com for the price of the CD-ROM or DVD. A customer could also buy access to Basecamp by the project. Instead, buying the premium subscription to each gives you unlimited access: the techie version of an all-you-can-eat buffet.
The downside to all this service selling is the missing deliverable product. I don’t mean the lessons provided by Lynda.com or the sanity doled out by Basecamp, I mean the ability for companies to buy a wonderful application in white label form. I wish Paypal and Flickr let you buy their code for a one-time, (very steep) fee so it could be used on the company Intranet or installed on the company server. If some of these applications were deployed as the product instead of the service as the product, we could actually obtain some of them.
Many of the traditional business model types were burned when the tech bubble burst and don’t buy into the idea that they need to be dependent on this great service. In the back of their minds, you hear them asking, “What if this company disappears over night? What happens to our mission-critical items we entrusted to their Ruby on Rails encrusted hands?”
If Flickr or Mad Mimi sold their applications as a product, I think it would only increase their sales. Some companies prefer the hands-off, no maintenance method of buying the services. Others want the security of knowing that if Flickr tanks tomorrow, they will still be able to access their photos and sharing their photos will continue without interruption. Many of these services are so strongly branded that I believe customers would seek out the familiar brands and buy the company’s application because it is trusted and has been tempered by experience.
This is all just conjecture, a stray thought after playing with some of the Web. Business is not my expertise, jut a passing interest. But still I wonder…how much are these companies missing out, in terms of opportunity and revenue? Aside from open source are there any other companies creating online white label products?
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Having done both SAAS and software, I can tell you that SAAS is much more cost-effective and bug-free. The QA process for software is so much more difficult, and releasing bug fixes is hellish. And the “what if they company tanks” problem still remains - most early stage software companies don’t document their software well (both user docs and the code), so even if you had the code you would still be in for a fair amount of hurt if you ever want to fix a bug or migrate your data elsewhere.
I’ll bet Flickr is enormously complex under the covers, and likely configured idiosyncratically. Even some open source products with hundreds of developers working on them are difficult to install (*cough* SugarCRM), and they were designed from the get-go as installed software.
drumdance
May 7th, 2008
You have some good points. True, there are drawbacks to buying the software outright. I don’t believe it’s the answer for everyone and I forgot to consider the inconvenience and growing pains of migrating data (that SAAS does protect against).
The main benefit of installed software comes into play if the company tanks because your content is not held hostage by the dying company. At that point, the worst that happens is using in-house help to do bug fixes and the software will not see upgrades in the future.
I have no doubts that Flickr is complex but even when it evolves to the satisfaction of its users and/or engineers I don’t foresee them porting the code as installed software in the future. (Although I wish they would.)
Thuy Nguyen
May 7th, 2008