Greg Enright: Software rental model on horizon

If Computer Associates CEO Sanjay Kumar is on the mark, you could soon be buying your firm’s enterprise software in a whole new way.

Speaking at a Gartner Inc.’s ITXPO conference in San Diego late last month, Kumar stated that within the next five to seven years, all major software vendors will have to adopt a month-to-month licence subscription model.

That essentially means customers would be paying rent for the ones and zeroes that keep your business humming, as opposed to the traditional method of purchasing a set number of software user licences for a set period of time. CA has already begun to offer such a model, and Kumar’s theory asserts that even the biggest players, such as Microsoft and Oracle, will eventually follow suit.

At first blush, the model presents both upsides and downsides. First the good news: with a month-to-month setup comes a lack of commitment to one vendor’s offerings and an easy out if the product or service is not up to par. No more waiting for long-term licensing agreements gone sour to run their course; simply give your last month’s notice and move on out to a competitor’s offering.

Another advantage is a much smaller up-front cost. Without a long-term commitment, there’s no need to fork over the comparatively huge fees that vendors demand for multi-year agreements.

A less-noticeable advantage is that, with the Sword of Damocles hanging over the vendors’ heads (in the form of customers’ newfound ease in which to pull out and go to a competitor), it’s conceivable that the Microsofts and CAs of the world would put extra effort into keeping those clients happy. That could take the form of more competitive prices, improved service efforts or – perhaps best of all – better products.

Let’s not forget the dark side of the month-to-month model, though. It’s equally conceivable that if the concept takes hold, the customer landscape could turn into a shifting sea of loyalty, with software purchasers bouncing from one vendor to another and back again. With such tenuous relationships being the norm, vendors could decide that it isn’t worth their while to pour a lot of effort into maintaining them.

Another downside is simply the disadvantage associated with leasing anything as opposed to buying it, be it a home, TV or network management suite: the payments never cease and at the end of the day, nothing is really yours.

Expect to hear more about this concept in the years ahead, and don’t be surprised if Kumar’s bold prediction comes true. What will win in the short term, however, is not boldness; it will be the soft sell approach, one which recognizes that the last thing IT departments need is a radically new way of conducting business. The vendors most adept at the “go-slow” approach will almost certainly end up leading the pack.