Should Software Updates be charged?

If you work for a large organisation, this is the least of your worries. The chances are that as a developer these ar not the decisions that you shall make. However if you are a smaller organisation (Indie, start-up, etc) this is the burning question, should you charge for software updates?

Cost of development

Why do you do this? Why do you develop software, if the answer is for the love of it and you are already in gainful employment tat pays your bills and you develop this software after hours because you are passionate and/or wanted to pursue this concept that's fine. However if you pay your bills from the proceeds of all sales, then the chances are unless you sell your application in HUGE numbers or at a rather expensive selling price (often beyond the upper limit on the App Store). So the cost of development is basically the time you put into it. The cost of the software to you, the developer is the time in consulting hours you have spend on developing the software.

What do you mean paid upgrades

Let me take the example of two softwares, one is Screenflow and the other VMFusion.

Screenflow allows you to capture your screen and help you create screencasts. I had a review on the same for version 3.x. Whenever I start Screenflow 3.x it tells me that there is an update that is available. It is a paid update so I have the option to either choose it or disregard the update. If I disregard the update, all that does is NOT offer me the new functionality. I upgraded to 4.x via a MacUpdate Bundle special (I think) and then I got a message that there was version 5 and that allowed me to capture from multiple devices, the iSightCamera, the Screen and a connected iOS Device. I so wanted that feature, but if I do not upgrade, I can still do what I want and I could achieve the device recording via QuickTime, AirServer, Reflections or any other software that can provide that functionality.

VMFusion, for those that do not know this, this allows you to run a virtual machine and install Windows or Linux or even Mac OS on the virtual machine. I started off with VMFusion 1.0 for the Mac (it ran on my upgraded to 4GB white plastic MacBook) then when I moved to the MacBookPro, I upgraded it to v2.x, then v3.x (because I got the upgrades with some bundle offer). I was running a windows XP virtual machine on this and it was helpful for supporting a particular software that was made for a client that wanted to run it on Windows XP.

Even Apple was pushing upgrades, at first they used to charge for their upgrades, so you had to pay approximately $30 to upgrade from Tiger to Leopard and then another $30 for Snow Leopard. With Lion they made it Free so you could upgrade your OS for free. With each upgrade of the OS, there were newer features that were added (disappointing was that it removed backwards compatibility with a lot of older Mac Software, in contrast, you could still run an old windows program on windows 10) To take advantage of the new features, most vendors/developers update their softwares to include functionality available with the new OS.

Everything is fine up-till this point. It is at this point that things start to fall apart. VMWare pops up a banner that informs you of how you are no longer able to use their software on the new OS and unless you upgrade, you are well... locked out.

UPDATE: Another interesting case in this is Parallels Desktop for Mac. The interesting update from Parallels is kind of what the article suggests; Parallels has provided two options for upgrading, either a $65 Upgrade or an upgrade for $65/year to the Pro Version. This indicates two things, 1. There will be annual upgrades and they will NOT be free. So if you get onto the Annual upgrade option plan, you are upgraded to Pro. The difference between Pro and normal is the ability to have remote access via Parallels Access and support for Docker, Jenkins and Chef.

The real cost of software

This is one favorite topic of mine as the real cost of software is not the sticker price that you see on the app store or the box. Take for example, Clash of Clans, the app is free, then how is it the highest grossing app on the app store. Alternatively take the case of Boom Beach, Simpsons Tapped Out, or any other such FREE games, if you need to progress fast, you would end up buying in-app gems, so if you want to calculate the real cost of any FREE game, take the cost of each and every item and then calculate the cost of the same in real dollars (from gems, donuts, jewels, etc). You would be surprised to know that 60 donuts in Simpsons cost approximately $6.49 (AUD) and 60 Donuts can get you approximately $153,000 in-game dollars or you can buy either of Hans Moleman, Bumblebee Man or a Blue Funzo. If you were to buy something more useful, you would need approximately 150 odd donuts and a 132 donut tray costs $12.99 (AUD) and a truckload of 300 donuts is $24.99. However, you can still play the game without spending a single real cent on the game. The game play is not impaired in any manner. You can calculate this for any game you want, if you were to use Diamonds in Boom Beach, they are from $6.49 (AUD) for 500 to $129.99(AUD) for 14000 and to upgrade a building, I need say an additional 598258 wood, 351772 stone and 33003 iron, this requires 822 diamonds, so a mortar upgrade from Level 13 to 14 would cost approximately $10 and if you were to Instant build it it costs 1634 diamonds, which is approximately $12.99 worth. That is for just one building, and that is the reason why there are a lot of *enablers* for Android and Jailbroken devices that give you a sudden windfall of gems and diamonds, etc. I met a kid recently, that said he had his Clash of Clans base upgraded with gems and was a level 150+ in the Master league, etc and spend approximately $45,000 worth of diamonds from an app or website for his Android phone.

Who should pay?

In the example above $45,000 of lost revenue from just one player, put together the multitude of players and you can quickly calculate the lost revenues, say just 1000 players cheated in this way that is 45,000,000 ($45m in lost revenues). Luckily, there are others that are paying and SuperCell is making quite substantial amounts of money via in-app purchases.

Looking back at the desktop and/or utility apps, another example that comes to mind is Omni Graffle. When I moved to the Mac around mid-2007 I could not find much use for a mac since it did not have a rich collection of software. Coming from the Microsoft world and a Technet and MSDN subscriber and a MCP I had access to most of the Microsoft Software and very well versed with Visio, I could not find something similar for the architecture diagrams I wanted to make. That is when my supervisor got me Omni Graffle Pro (on Tiger) and it gave me updates through out the times, and today I get a message that I am on v 5.4.4 and I can upgrade to 6.0 for $99.99 (or buy a new Pro version for $199.99). For what I do with it and when I use it, I am fine with this version - I do not require to upgrade. I have used it to create graphics for some of my books and it does a stellar job.

Take the example of Photoshop, I had purchased Master Collection for CS4 and I cannot afford to upgrade to CS5 or CS6 and more. Secondly after paying the hefty Australian Tax on Adobe Software, I am not willing to spend on that anymore and specially NOT with the online subscription version for approx $20.00 a month. Similarly, I remember helping my dad and his colleages (I had just finished my grade 10) with using Wordstar and teaching them how to use it. I was also enrolled in a course and learned how to use dBase III+. From there, I have seen so many software packages evolving and providing a service and mainly in Office Automation. I even have the original Microsoft Word 2.0 user manual as I still have the Windows 3.1 SDK reference that came in a set of 7 books. Having gone through word and excel versions, to Office 95, 97, 2000, 2004, 2007, 2010, 2013 to what they offer today as 365. It is a bit disappointing, Earlier people purchased office and then paid again for the upgrade if they so required. Now with the subscription model, the day you stop paying, you are left out to hang dry. This is what is not ok.

It is almost the case as to why products build in the olden times lasted longer than today, it is almost that where longevity was a prime focus in the past, it seems to be same even today but with the difference that then they tried to make it last and today the aim is to make it NOT last. The age of disposables is upon us.

What's wrong with that

There is absolutely nothing wrong with that, if you are a stakeholder or an employee of that organisation. However as a consumer for any Hardware or software, if you are forced to spend over for no reason, that is an issue.

Take the example of Apple iPad, the first ones, I have one is perfect working condition and absolutely sparkling new as it was about 5 years ago. I can use it to have apps that still work on iOS 4.3 and the net works fine. So that $800 device (that most would suggest to write off) is now useless and my iPad2 64GB+SIM that was purchased around 2012 (before the iPad Retina was released) is also now NEARLY useless however it can still be upgraded to use iOS 8 (not recommended really). Or the iPhones, since I am on a Telco plan, every 2 years I get a new iPhone, the iPhone 3 (not 3S) is now unusable (very slow) even as a phone and the iPhone4 (not 4S) is now used for some games that still exist and for an alternative Facebook and Whatsapp accounts. These will be unusable soon, but the devices are in top condition. Surprisingly in 12 months from now I would be eligible for the newer iPhone whatever that would be.
Take also the example of the Apple Watch, it did not sell well because people are fine with writing off and replacing phones and tablets, but a watch is a luxury item and cannot be written off. So unless there is a way that the innards of the watch can be upgraded along with the software than junking the watch entirely, I would spend my money on a Swiss analog variant.

Summary

The point is that yes it costs for all activities related to taking an organisation and their products into the future, be it hardware or software. People are fine to pay for an upgrade, but would you like a car that would refuse to function unless you purchased a new model every 6 months? If that would be the case then there would be no market for Vintage cars. Similarly, software should be priced with the following in mind, if it needs to be constantly upgraded to allow the developers to keep working at it, then it should be charged at a much lower price, almost like a subscription price - BUT for a perpetual license. That is if you stop paying, you do not get updates. So, for example the cost of VMFusion from version 1.0 to v5.0 is on an average $50, it has cumulatively cost $250 and still expects a PAID update of another $50. If the cost of VMFusion was say $15, It would not have been such a decision to upgrade as $50 per year is. While one looks at it as only $50 (an additional $35 from the $15 I am proposing) a fact often neglected is that that is just for this one software. There might be several other softwares and hardwares that might need similar upgrades. It is difficult to buy a new Mac and iOS devices every year or every two years. Strangely, I am not very keen on replacing my iMac (27" mid 2010, 24GB RAM) with a newer slimmer design because I need the CD-Drive and like the sturdiness of the design. I would want to upgrade solely for the newer processor and the Retina display, but I am not missing much to spend on it immediately. Just updating hardware would cost me approximately $12,000+ so the choice is upgrade hardware that will add little to no additional immediate value or spending it on Mortgage, holiday and family. That is the trade-off that a lot of consumers need to make.

So as a developer, I understand the need for consumers to buy updates, it keeps the shop running. The upgrades must be a choice not forced, add features that make someone want to upgrade not lock them out to upgrade. If the only way is to provide upgrades, offer a perpetual license AND keep the price to something that is affordable. We are in the times of micro-transactions, so focus on the volumes, not the transactional value.

There is something that I must say before ending the article, I came across a tweet with the speech that the current Indian Prime-minister made on their Independence day (English version here). The topic was on providing bank accounts for the poor. The Indian banks have a rule that they need a minimum balance of 1000 rupees. He declared that bank accounts be provided for all even if they have a zero balance. He mentioned that he knows that the wealthy have money, however when the poor were given the opportunity to open accounts with low balances, overall an amount of rupees 20,000 crores was collected, that is approximately 4 Billion Dollars. The poor in India are worth $4 Billion. There is great power in micro-transactions, that is also made evident with kickstarter and crowd-funding.

Another side note, with the success of strategies that he has been attributed towards, one of the other topics in his address was to see start-ups all across the country. You can well imagine that if there is a government support and micro-loans etc it can disrupt how things are going in the world economy.