Is software a business? Can a company make money selling software, consistently and reliably? In 1983 many people doubted that these statements were true. In 1993, we have one great success story but little confidence that other sectors and companies are safe investments for the long term with predictable chances for growth.
By 2003, I believe that everybody will know the answers to these questions: ``Yes, and yes''. Within 10 years the software industry will have restructured itself from a costly and unpredictable bookstore/appliance dealer sale-oriented model to a cable TV-like subscription model. The companies who emerge from the turbulence of this transition will be the colossi of the industry, no more and no less inherently risky than television networks, book publishers, or regional telephone companies. Their revenues, measured in the billions to tens of billions will fund ongoing product development aimed and increasing their subscription base.
Ironically, they may cease to be viewed as ``growth stocks''--once the constant revenue base comes to eclipse the near-term potential of a new product launches, their performance may appeal to those who buy utility stocks today. (But then when electricity use was growing exponentially in the early '50s, utilities were ``growth stocks''.)
It's 2003. The little black box on the top of the TV is hardly big enough to hold all the logos printed on it: Microsoft, Time-Warner, Swiss PTT, SES/ASTRA, General Instrument, Dolby Labs, Intel, Motorola/Iridium, etc. A couple of wires hook it to the TV and the computer, and the ubiquitous smart card sticks out the front. Every month I get a bill for the programs I subscribe to:
|Astra Basic pack||2.00|
|Eutelsat Basic pack||2.00|
|The Dinosaur Channel||0.50|
|Microsoft Basic pack||4.00|
|Microsoft Developer Network||10.00|
|Microsoft Visual C+++++||9.00|
|Autodesk Cyberspace Explorer||8.00|
|EuroFeed Internet News Link||1.00|
|BBC World Service Radio||0.25|
|...about 20 more||...programs are programs|
And since the bill gets paid automatically, and it's only about 200 francs a month, I don't look at it too closely (other than that AutoCAD thang--wonder if they'll ever give me a break!). Each little nibble is so small, though, compared to when I had to shell out US$400 over the counter for some software I didn't know would even work when I installed it, that I pay and pay and pay.
This document is a work of education, not advocacy. I believe that wisdom consists of embracing change, not battling it. We win by enlisting the slow but inevitable forces of economics on our side, not by shoveling sand to halt the tide. All the evidence I can see convinces me the software business is finally making the transition to a recurring revenue model which will be its salvation. This transition will entrench those companies who leverage their large existing market share into a consistent and reliable base of recurring subscription revenue.
Among major software companies, Microsoft and Autodesk (in the CAD sector) are uniquely positioned to lead this transition and benefit from it.
Editor: John Walker