Microsoft's Equipt Vindicates, Challenges Open-Source Business Models
by Reuven Lerner - Jul. 07, 2008Comments (2)- Related Blog Posts
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Last week, Microsoft announced "Equipt," a subscription service for Microsoft Office and related products. The product, which will cost $70/year and be sold at Circuit City stores, will provide the user with one year of updated anti-virus and spyware programs, Microsoft Office, and access to the "Live workspace" product for sharing documents. Equipt is not an open-source package. Rather, this is a way to keep the revenue coming from Microsoft Office. But Microsoft's new pricing strategy both vindicates and challenges business strategies employed by open-source companies.
Microsoft's announcement takes us one step closer to paying for software via regular subscription fees. Most consumers are now used to the idea that they buy a piece of software, and can use it for as long as they like. Equipt, by contrast, offers a license that expires at the end of each year, and which must be renewed. From reading Microsoft's press release and other information about Equipt, it is not obvious whether the included software stops working after one year, or if it simply becomes unlicensed. Shutting the software down if the user fails to renew a subscription had obvious benefits to Microsoft, but might be too intrusive for consumers, or unworkable for people without Internet connections.
What's interesting is that the open-source world has also been moving toward annual software licenses. Red Hat is perhaps the best known of the bunch, with its Red Hat Enterprise product that provides paid updates on an annual basis. If you fail to pay your subscription fee, then your Linux installation will continue to work. However, you will not be eligible for additional updates.
The difference, of course, between Red Hat and Microsoft is that all of Red Hat's software is open source. As a result, it would be possible for another company to offer support to Red Hat customers, offering a competing update service. Indeed, this has already happened -- Oracle, for example, offers "Oracle Unbreakable Linux," which offers Red Hat users the chance to receive support from an alternative, and presumably cheaper, source than Red Hat itself. It goes without saying that Microsoft will not permit third parties to provide alternative updates -- not that this is a real issue, given that there are no third-party sources for Microsoft products.
Moreover, the fact that Red Hat's products are open source means that you are free to modify or update the software as you see fit, even if your vendor strongly suggests otherwise. Thus even if your distribution prefers the Exim SMTP server, you can replace it with Postfix, for example. This sort of user-side tinkering and changing is at the heart of the open-source movement. Even when companies don't exercise their right to change things, the fact that they're allowed to do so, and that they are not dependent on a third party, is a powerful argument in favor of open source.
Microsoft's pricing may also put pressure on open-source companies. Equipt will cost $70, but will allow users to install software on up to three computers. Given that Microsoft already provides automatic updates for Windows, this means that it might soon be cheaper to have updates and fixes for Windows than on a professionally supported Linux workstation. (Red Hat charges $80/year for a single subscription to Red Hat Desktop.) Of course, Linux users who stick with completely free distributions, such as Debian and Ubuntu, don't have to pay for updates. Not all organizations are willing to install community-supported distributions, however.
Software companies have long talked about moving to a subscription model. Microsoft's announcement indicates that both proprietary and open-source software may be converging toward this same model. It remains to be seen which will be cheaper, in the long run and the short run, and whether open source will continue to offer significant advantages over its proprietary counterparts.
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