Beware of strangers bearing subscriptions

Stop for a second and think about everything you subscribe to. These are things that you pay monthly or annually for, that if you didn’t pay for, some service would discontinue.

The list probably includes everything from utilities to reading material, and most likely a streaming or media service like Netflix or Hulu, or a subscription to Amazon Prime, Xbox Live or iTunes Match.

I’ve been noticing a tendency for seemingly everything to move towards subscriptions. Frankly, it irritates me and I’m not really excited about the idea.

I understand and accept that natural gas, electricity, waste management, and (ick) even insurance need to be paid for regularly so we can maintain a certain lifestyle. But the tendency to treat software as a utility, while somewhat logical, isn’t necessarily a win for the consumer or the business (it depends on the package being offered, and how often you would upgrade if you weren’t being offered a subscription).

That puzzle, of course, depends on the consumer or business to not bother to do the math and just assume it’s a better deal (or get befuddled trying to decode the comparison), and just subscribing. Consumers, and frankly many businesses, are not great at doing that math. Many subscriptions are also – literally – incomparable with any peer perpetual license. Trying to compare Office 365 and Office 2013 for consumers is actually relatively easy. Even comparing simple business licensing of Office 365 vs. on-premises isn’t that hard. Trying to do it in a large business, where it can intertwine with an Enterprise Agreement (enterprise-wide licensing agreement), is horribly complex and hard to compare.

Most subscriptions are offered in the hope that they will become an evergreen – something that automatically renews on a monthly or annual basis. Most of these are, frankly, awful, in my opinion. Let me explain why.

Recall the label on the outside of many packaged foods in the US. You know the one. Think about the serving size. This is the soda bottle or bag of chips where it says 2.5 servings, though most consumers will drink or eat the whole thing at one sitting. Consumers (and again, many non-IT business decision makers) are not really great about doing the long-term accounting here. A little Hulu here. A little Amazon Prime there. An iTunes Match subscription. Add on Office 365… Eventually, all these little numbers add up to big numbers. But like calorie counting, people often lose track of the sunk costs they’re signing up for. We wonder why America has a debt problem? Because we eat consumer services like there’s no bill at the end of the meal.

You don’t need to count every calorie – but man, you need to be aware before you have a problem.

I’ve become a big fan over the last several years of Willard Cochrane, an economist who spent most of his life analyzing and writing about the American family farm. Cochrane created an eponym, “Cochrane’s Treadmill”, which describes the never-ending treadmill that farmers are forced into. Simplistically, Cochrane’s Treadmill can be described as follows.

Farm A buys a new technology that gives them a higher yield, it forces down the market price of the commodity they produce. Farm B is then forced to buy that new technology in order to improve their yield in order to  even maintain the income they had before farm A bought that technology.

By acquiring the technology, Farm A starts an unwinnable race, where he (economically) is pitted against farmer B in trying to make more money, generally from the same amount of land. Effectively, it is mutually assured destruction. Work harder, pay more, earn less.

I’ve been spending a lot of time recently trying to simplify my life. I’ve been working to remove software, hardware, and services that add complexity, rather than simplicity, to my life. As humans, we often buy things on a whim thinking (incorrectly), “this new <thing> will dramatically improve my life”. After all, the commercial told you it would! Often this isn’t the case.

Without getting off on an environmentalist hippie trip here, I’d like to circle back to farming for a second. Agricultural giants like Monsanto have inserted themselves into the farming input cycle in a very aggressive way. If we go back 100 years, farmers didn’t pay an industrial concern every year for pesticides, and they most certainly didn’t pay them an annual license fee for seeds (farmers are forbidden to save licensed genetically modified seeds every year, as they have done for millennia). As a result, farmers are not only creating a genetic monoculture that is likely more susceptible to disease, but they are subscribing to annual licensure of the seed and most likely an ever-increasing dosage of pesticides in order to defend against plants, insects, or other pests that have developed defenses against them. It is Cochrane’s Treadmill defined. Even worse, if a farmer wanted to discontinue use of the licensed seed, it’s unclear to me if they actually could. Monsanto has aggressively gone after farmers who may have even accidentally planted their seeds due to contamination. Can a farmer actually quit using licensed seed and not pay for it next year? I don’t know the answer.

I bring this up because I believe that it exemplifies the risks of subscriptions in general. Rather than a perpetual use right (farmers saving seed every year), farmers are licensing an annual subscription with no escape hatch. Imagine subscribing to a Software-as-a-Service (SaaS) offering and never being able to quit it? Whether in the form of carrots – “sweeteners” of sorts added to many subscriptions (such as the much more liberal 5 device use rights of Office 365), or sticks (virtualization or license reassignment rights only available with Microsoft Software Assurance), there are explicit risks of jumping into using almost any piece of software without carefully examining both the short-term use rights and long-term availability rights. It may appear I’m picking on Microsoft here. I’m not doing so intentionally – I’m just intimately, painfully, aware of how they license software. This could apply to Adobe, Oracle, or likely any ISV… and even some IHVs.

Google exemplifies another side of this, where you can’t really be certain how long they will continue to offer a service. Whether it’s discontinuing consumer-grade services like Reader, or discontinuing the free level of Apps for Business, before subscribing to Google’s services an organization should generally not only raise questions around privacy and security, but just consider the long-term viability of the service. “Will Google keep this service alive in the future?” Perhaps that sounds cynical – but I believe it’s a legitimate concern. If you’re moving yourself or your business to a subscription service (heck, even a free one), you owe it to yourself to try and ascertain how long you’ve got before you can’t even count on that service anymore.

While I may be an Apple fan, and Apple doesn’t seem to be as bullish on subscriptions, one can point to the hardware upgrade gravy train that they have created and see that it’s really just a hardware subscription. If you want the latest software and services from Apple, you have to buy a new phone, tablet, laptop, or desktop within Apple’s set intervals or be left behind. Businesses that are increasing their use of Apple technology – whether they pay for it or leave it to the employee to pay for – should be careful too. Staying up-to-date, including staying secure, with Apple generally means staying relatively up-to-date with hardware.

In The Development of American Agriculture, Cochrane reasoned that <profits> “will be captured by the business firm in financial control”, and would no longer go to farmers. Where initially the farm ecosystem consisted of supplier (farmer) and consumer, industrial agriculture giants have inserted themselves into the process of commodity creation – more and more industrialists demanding a growing annual cut from the income of (already struggling) American farmers.

Whether we’re talking seeds/pesticides, software, utilities, or any other subscription, there is a risk and a benefit that should be clearly understood. But I believe that even more than “this year”, where the immediate gratification is like consuming the 2.5 servings I mentioned earlier, both consumers and especially businesses need to think long-term; “Where will this service be in 3 years?”, “Will we be paying more and getting less?”, “If we go there, can we get out? How?”

When you subscribe to anything, you’re not taking on a product, you’re taking on a partner. Your ability to take on that partner depends upon your current financial position and your obligations to that partner, both now and in the future. While many businesses can surely find the risk/benefit analysis of a given subscription works out in the subscriber’s benefit (if they are really using the service regularly, and it provides an invaluable function that can’t be built internally or completed by perpetually licensed technology), I believe that companies should be cautious about taking on “subscription weight” without sufficiently examining and understanding 1) how much they really need the services offered by that subscription, 2) what the the short-term benefits and long-term costs of the subscription really are, 3) the risks of subscriptions (cost increase and service volatility among them), and 4) how that subscription compares in terms of use rights, costs, and risks, with any custom developed or perpetually licensed offering that can perform similar tasks.

If it seems like I’m anti-subscription, I guess you could say I am. If you want a cut of my income, earn it. Most evergreen subscriptions aren’t worth it to me. I think too many consumers and businesses fall prey to the fact that “just subscribing” rather than building and owning a solution, or buying a perpetually licensed one, sounds easier, so they go that route – and wind up stuck there.

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