In the not to distant past we often had to deal with the phrase “I want to purchase the software, not rent it“. To look at the issues this covers we need to define what purchase actually is, for this example we have used the definition by some of the competition in our market.

For example what is “purchasing” software? Looking at almost all the traditional construction estimating software companies you purchase a licence for you (or your company) to use their software on your computer.

There is a widespread misunderstanding about purchasing software. In the last sentence, we used the word “purchase,” but that isn’t completely correct. You don’t purchase a copy of the software; you purchase a restricted license to use the software. So, even when you think you are purchasing software, you aren’t. As with SaaS (Software as a Service), you are purchasing the right to use the software.

So what happens after the purchase is complete and the “free” year of upgrades is finished?

1) You get a new computer with the latest version of Windows or Mac OS and your version of the product does not support the new version, you then need the latest version of the software to load onto the new operating system, this is usually an additional cost.

2) You get a new version of Excel  and your version of the “purchased” software does not support it.

3) If a bug or problem is found and you are out of the free upgrade period you HAVE to buy the updates to get the bug fixed.

4) When a new version is released of their software, your version will not be supported if bugs are found as the company just cannot keep all their software patched(You HAVE to upgrade to get the bug fixed)

So in short, after you have spent £100’s or £1000’s on “purchasing” the estimating software. You will HAVE to pay more to the company to keep the software working on the latest version of your operating system or computer.

Now to the advantages of Software as a Service : –

1) Very low capital expenditure

2) Very low risk in losing more than the monthly fee

3) Available always on all internet connected devices.

For a more in depth look at the economics please see this excellent (and detailed) article.