If you've made it all the way through my arguments without either getting lost in my thorny prose or storming away in violent disagreement with my premises or deductions, you may be beginning to think I'm onto something here. But that raises the legitimate question, ``Well, if even Walker's figured it out, why isn't everybody in the industry already doing it?''. Indeed, I've wondered quite a bit about that myself.
I think the answer lies in the observation that most companies who succeed in building self-sustaining subscription-based businesses start from a position of effective monopoly of their sector. In the case of AT&T, it was a combination of technology, patents, and government grants which conferred the monopoly. IBM built its first monopoly in tabulating equipment on the patent of the Hollerith card, then clawed its way to an effective monopoly in computers by out marketing and out-customer-servicing Remington Rand, Burroughs, and others. Xerox derived its monopoly from the patent on xerography.
Quite simply, to derive enough revenue from a subscription strategy to make the business run, you have to have the lion's share of the market, not a small slice. To get people to subscribe, you have to have demonstrated technological leadership that convinces them they'll get more value by paying you regularly than buying from somebody else outright, then replacing the product later on. And of course the central development engine needs to be big enough to keep generating the value that gives subscribers value for their money, year in and year out.
Which means that to pull off the transition to a subscription base, you have to start with a large market share lead, and therefore the only companies in the software business well-positioned to do this today are:
Autodesk (in CAD)
Word Perfect (in word processing, but slipping)
Lotus (in spreadsheets, perhaps, and slipping quickly)
Editor: John Walker