The future of apps is services

Every Friday, The Network column brings you the perspective and charm of the best and brightest minds in the Apple and tech community. This week we have iMore alumni Peter Cohen. A 30-year Apple industry vet, Peter had careers in tech support and IT before writing for Apple magazines and web sites beginning in the mid-90s. He's currently a technology writer at Backblaze.com and you can find him on Twitter at @flargh.

Developers who can find ways to do it are migrating to a subscription-based publishing model instead of what's become known as a "perpetual license" (pay once and forget about it). Expect this trend to continue. Case in point: Smile Software's newest release of TextExpander, the popular keyboard shortcut utility. Even if you don't welcome this change, it's important to understand what's going on here that's brought us to this point.

TextExpander goes pay-to-play

New versions of TextExpander for OS X, iOS, and now Windows are available for download. Unlike previous releases, the new release requires you to have a new TextExpander.com account. After a free "test drive" period, you'll be asked to pay $4.95 a month for to continue using it (annual discounts and upgrades are available).

After a free "test drive" period, you'll be asked to pay $4.95 a month.

The subscription model does more than just enable you to use the app, though. Smile is centralizing online syncing of TextExpander. Owners of the previous release could use iCloud or Dropbox in order to sync text snippets between devices and workgroups. Now that's gone and everything is handled as a service through TextExpander.com, which introduces a web interface to enable you to manage snippets and how they're shared. To help entice businesses to migrate to the new service, Smile's incorporated new team sharing management capabilities.

All told, There's a lot more going on under the hood with the new TextExpander service, which is why Smile wanted to roll its own sync service rather than continue to depend on iCloud or Dropbox.

There's no gun to your head to upgrade, if you're an existing TextExpander user. Your version of TextExpander still works. You got what you paid for. Just don't expect too much more in terms of new features or new operating system support unless you migrate to the new product.

Apps as services

Adobe Creative Cloud on Mac (Image credit: iMore)

Smile joins some big players at it seeks to reinvent TextExpander as a service instead of as an app you pay for once until the next major upgrade. Take Adobe, for example. The company went all in on the service model a few years ago by focusing development of their creative apps as the Creative Cloud. An ever-growing constellation of new apps and services continue to give creative professionals reasons to subscribe to Creative Cloud products.

Microsoft has done the same with Office, and while Office 2016 is also available with a perpetual license, Microsoft gives users plenty of incentive to subscribe to Office 365 instead, with more flexibility and better features. Office 365 users got the earliest look at Office for Mac 2016 when it made its debut last year.

Even Apple's gotten into the act. Buying an iPhone or a Mac is just the start. If you want to use Apple Music, that's another $10 per month. iCloud is free, unless you need more space. Family plans, added iCloud space and optional services like Apple Music have many of us tithing to Cupertino faithfully every month.

(In the interest of full disclosure: I work for one of those companies I'm talking about: Backblaze.com - we sell cloud-based backup services for Mac and Windows users. Our subscribers pay a flat monthly fee and in turn, we back up their computers to our data center.)

Software as a Service certainly doesn't work for everyone, and Smile is bound to lose some customers as it makes this migration. Other text expansion and shortcut utilities for Mac and iOS are available. Smile's move is likely to spur at least some of those developers to redouble their efforts to win hearts and minds away from Smile.

Likewise, some designers still hold out with their Adobe Creative Suite 6 software or have migrated to other non-Adobe products all together. There are plenty of other productivity apps and suites besides Microsoft Office.

Devil's advocate

As hard as it may be to shift perspective, consider the developer's point. A subscription model offers a regular flow of income, and stops the developer from having to run on what Smile CEO [Greg Scown calls](/e?link=https%3A%2F%2Fwww.shareasale.com%2Fr.cfm%3Fb%3D1215646%26m%3D81274%26U%3D885495%26afftrack%3DUUimUdUnU37197%26urllink%3Dhttps%253A%252F%252Fsmilesoftware.com%252Fsoftware-releases%252Fentry%252Fthe-new-textexpander&token=yVmevOG- "the upgrade treadmill."

That helps to predictably support current and future development efforts, instead of having to plan development cycles on the expectation of a big windfall whenever there's a major new release.

Without a discount, you're going to spend $60 a year on TextExpander, a utility whose previous release cost $35, once.

Rather than having to save big ideas for major version releases, new features can be rolled out gradually and incrementally as service improvements, instead of dangling them as enticements to get people to spend money on upgrades. The developer has the incentive to keep service excellent and new features coming, otherwise subscriptions will drop off. When it's done well, it works out better for everyone.

In Smile's case, owning the sync stream makes sense too — it enables them to do more, going forward, with snippet syncing than they could before, as evidenced by the new web-based interface employed by TextExpander, its greatly enhanced workgroup sharing capabilities, and other features (and possibly new products) Smile undoubtedly has planned for the future.

The value of the software has changed for many users, however. There's a big difference between paying once for a utility that you'll use indefinitely and paying every month. Without a discount, you're going to spend $60 a year on TextExpander, a utility whose previous release cost $35, once. Are the new features worth it? What happens if Smile pulls up stakes on the service?

As evidenced by the outcry on social media, some TextExpander customers are not happy with the change. And why should they be? This is getting exhausting.

As I said before, when it's done well, it works out better for everyone. When it's done poorly, customers get screwed. Another case in point: Revolv, a recent Google acquisition that was folded into Nest, the business started around a smart thermostat. Revolv goes dark next month, and anyone with a Revolv hub is going to be stuck with a very expensive doorstop. Televero CEO Arlo Gilbert recently took Tony Fadell and Nest to task for abandoning Revolv.

Death of a thousand cuts

Ever since the personal computer debuted in the 1970s the software business has existed to support it. Personal computer software has gone through multiple iterations and reinventions in that time, just as the computer hardware has.

For years, retailers ruled the roost. Boxed software and heavy bound manuals sat on store shelves. We paid for software when we needed to, and we were done.

As more of us went online, we discovered that we could download shareware. Once the Internet became ubiquitous it became possible to just buy apps through app stores instead. Constant downward pricing pressure in those app stores forced developers to figure out other ways to produce a sustainable income. Once Apple had a mechanism in place, some developers began giving away apps and offering in-app purchases.

To that end, selling software as a service is simply another reinvention. There are already successes, there are already casualties, and there will be more.

The problem, of course, is that all these services add up.

The problem, of course, is that all these services add up. And they add up fast. Office 365 costs $10 a month. Adobe Creative Cloud is another $50. $5 for TextExpander.com. Another $5 for Backblaze. Netflix. Hulu. It piles on. Before you know it, you're spending $100 or more on top of whatever your Internet costs.

It feels like the death of a thousand cuts - paper cuts inflicted by small bills. Microtransactions.

Of course, you don't pay your electricity bill or your phone bill just once - you pay it every month, because it's a service you find useful or necessary to your life.

Paying for software in the same way as we pay for electricity may seem odd. Most software isn't as essential as a cell phone or working lights, but the same rule applies for service - you should expect to pay something for its continued maintenance and development.

That is, of course, predicated on the assumption that you find that service worth paying for to begin with. If you don't, you can vote with your wallet. The choice is yours.

19 Comments

Though I don't doubt your opinion at all Peter, I do hope you're wrong! I'm not sure if it's an age thing, but i'm very much anti-subscription for certain services. I enjoy buying the music I like, I regularly buy apps, ranging from the more expensive (TomTom) $60+ down to the 99c wonders, but if those same apps became subscription based I mostly wouldn't bother. I think in some respects this is something Apple themselves need to address, because of the lack of upgrade functionality in the app store, more companies will pursue revenue streams that allow them to take back control, totally cutting Apple out of the loop. If there was an 'upgrade from your old version at a discount' button (which would be HUGE and cover the entire screen) in the app store, Apple would still be getting their cut, developers would still be getting paid again for significant upgrades, and consumers wouldn't be effectively paying full price for an updated version of an app they already have.
I'm very anti-subscription, when I pay for something I should own it, I don't want to have payments going out left right and center on random days of the month, it makes it very difficult to manage finances. It makes sense that if a large upgrade is done to an app or software you should have to pay for that, and if not continue using the old version. But like you said, a discounted price on upgrades would make a lot more sense
Hi Peter,
You keep mentioning just 2 different pricing models; The new $5 per month subscription Vs. the old $35 one-off purchase. But many (previously) loyal Smile customers were using a third payment model, which was to buy a full copy some years ago and then ALSO buy each upgrade as it was released. I used to do this, and I was happy to buy each upgrade as it came along because there was perceived value in all the added functionality that was on offer. One of Smiles biggest errors with this move to subscription in version 6 is that they're asking their loyal customers to start paying (effectively again) for a version which is not even functionally equivalent to the one they are already using and had already paid for previously (e.g. the removal of Dropbox and iCloud sync) I've paid quite a decent amount of money to Smile over the years for my textexpender upgrades. I will not tolerate this overpriced subscription model which requires more money from me for no value (to me) in return. I've already switched to one of the many alternative tools, and paid them for the privilege. It's ironic, and more than a little sad, that this move to a subscription model in order to produce a more sustainable revenue stream, will likely result in the revenue stream being decimated and hasten the end of what was a really decent product. Storm. PS Comparing little Smile to giants like Adobe and Microsoft and Apple is so funny. Perhaps the folks at Smile deluded themselves via a similar comparison and that contributed to this misguided decision. They made the mistake of believing their own propaganda.
I think the software as a subscription model is a false economy. While some software such as Microsoft Office or Adobe makes sense as a subscription service, small apps like Textexpander do not. As you point out in your article we don't pay once for electric or phone service. The difference is that Office, Adobe, your electric and phone are services that offer a wide amount of things you can do with them. Textexpander is a very narrow use compared to the above. If every little app and developer switches to this model they will quickly be at the same place the App Store is now. A race to the bottom that doesn't really serve the user or developer in the long run. I like the model Evernote has. You can use most of the core app and if you want more you can pay. Sent from the iMore App
Sadly, I do think this is the shape of things to come. A lot of these companies will suffer because of it, as like you say, people can "vote with their wallets" Perhaps the answer is to have group subscriptions, where you pay a more competitive price for several services, thus keeping the income going for the companies and offering a reasonable fee to pay for the customer. People will adapt to the subscription model, but they won't take being ripped off. I can't help but think that Apple, Microsoft and other major players could be doing more to help the situation. Phil Schiller recently moved over to the App Store, and my hope is that he brings some order and sense to it. It's been needing an overhaul for a while, and what better time to redraw the business model for the developers. Sent from the iMore App
I don't have a problem with subscription pricing. My problem is that Smile hasn't made a good argument for the price they are asking. The build in text replacement for iOS is good enough for personal use but TextExpander is a better fit for work. At work I can justify buying software licenses for things I need because they are one time expenditures. When I sign up for a recurring charge I will need to justify the cost and $5/month is too high for what they are offering. I understand they want to offer things they can't as easily do with Dropbox or iCloud but I don't need or want that. My hope is that with the myriad of other Apple pundits not seeing the value either that Smile will offer something a little more reasonable for people like me. At the end of it all the success of this move will be the determining factor and that is not likely to happen for a few months, at least. I'm not going to upgrade and will likely find a replacement when what I have stops working.
That's a very wrong move !!! We have to subscribe per year basis to everything nowadays. They try to suck all of our money out of our pocket but i don't think it will work for everyone. At the end, consumers loose Sent from the iMore App
Smile's issue essentially isn't Textexpander revenue it's their product lineup. They used to have like 5 apps and as the market evolved they deprecated these apps and distilled down to PDF Pen and Textexpander. This is not a good thing because now you're only getting revenue from upgrades and new versions for two products instead of 5. Smile's mistake was not building their business. They could have moved into other areas that were synergistic with their current product lineup. A note taking or writing app. Clipboard sync etc. Now they're feeling the crunch they are literally chasing a Unicorn. They want companies to pay Slack pricing per user for a utility. They are betting the company on the notion that business have been champing at the bit to share snippets. Wow. Financial resources are finite and most people understand basic math. If they were paying you 60$ every three years and now you want them to pay $150 in the same timeframe the pot has to be sweetened. This is subscription models typically work best with expensive programs (i.e. Office, Adobe Creative Cloud, Autodesk) or developers with a suite of programs that people want. Developers today that could properly sell subscription pricing. 1. Omnigroup- great lineup Mac and iOS apps.
2. MacPhun - also solid lineup of Mac and iOS apps
3. MacAffinity- Once they get their Publisher and Digital Assets Mgr apps and iOS versions they'll be prime.
4. MacPaw - though they need another utility hit to strengthen their lineup
5. Readdle - Solid lineup. Mac app for PDF Expert available and Spark mail coming. When subscriptions work you generally take a product or suite of products that is prohibitively expense and you spread the cost over these monthly payments. Smile has take an an inexpensive product and made it prohibitively expensive and this is why the complaints are so loud.
Given that most software you pay for occasionally has a point where an upgrade has to be paid for. I consider most software to be a subscription anyway, just a bit more random in how often you pay, and a larger up-front payment. The problem with Smile, is that the value proposition to customers of spreading the costs out over time wasn't there, because there was no disguising the huge increase of cost of ownership. Contrast that with the MS Office and Adobe CS subscriptions that, even if customers paid more in the long run after the switch to monthly/annual pricing, it wasn't by such a huge margin.
Well, I did the computation... Using TE since the first version did cost me a little less than $12 annually (considering upgrade pricing). We talk about 500% really... There simply is no argument to be made for that. What am I funding here? Their fancy new web site and their Windows development (could not care less about either)? The approx. 1 MB premium storage space I will use on their servers? (All my snippets combined are not even half of that. We talk about some plain text files here.) Adobe and MS provide more for less – especially in a business with a lot of fluctuation in staff numbers, solutions like Office 365 or Creative Cloud make a lot of sense. You can forget about license management, you do not buy licenses that will never be used again after a project finishes etc. And they give you ample free storage, access to new products and platforms etc. All that for a price that is actually lower than before. And they are actually big enough to have some network security etc. in place. My snippets include phone numbers, account numbers, address data etc. And I synced them to iCloud, because I trust Apple. What does make Smile an expert in the operation of a secure datacenter? Is the price the qualification? Sorry, but "no, sorry".
Not going to restate what everybody else has said above but I don't want hundreds of subscriptions, it is a massive price increase but just as importantly and I don't think this has been said as much as it should have been in the comments I have seen, the app has basically been stagnant for years. I bought version 4, saw nothing added in 5 I wanted and see nothing in 6 I want. I also think that Smile seem to have forgotten about the market, the market will decide the price, not what Smile want. There is more competition since the app stores arrived and if someone is will to produce a similar app for less (aText 4.99) that is your price as well unless to provide a substantial difference to justify the added cost.
Good article, Peter. My view: TextExpander, while a great app, is not worth the new price to me. I feel like the large majority feel like I do: Great product, but not worth the asking price. I will be surprised it TextExpander is still around in the next two years, absent a big price reduction.
Great thoughts, Peter. I think in many cases, the subscription (or service) model can work well -- the issue we're seeing is, as you and other commenters have alluded to, the pricing structure within that model. Some developers are doing a great job with this while many developers are doing a terrible job with it. The common flaw I see is developers trying to account for short-term subscriptions by jacking up the rate for all subscribers. This is much more elegantly solved by incentivizing extended subscriptions. Microsoft, Adobe, and the like all toss you a substantial discount for a year's contract (and even if you're still paying that bill monthly). Most smaller developers, on the other hand, are currently just throwing out a one-size-fits-all (if we're being generous) price that does little to encourage users to stay with the product or discourage users from leaving it. Smile, for example, knocks a dollar off for a year's contract, and then only if you prepay for the entire year. Even with that discount, TextExpander's now 34% more expensive than a new, perpetual version used to be. Are users going to find 34% in added value over previous versions? Couple that with developers frequently making this leap with little to no consideration for their existing customers, and it's understandable that the natives are getting restless. It's not like we haven't seen all of these gaffes before; developers should at this point be learning from the many that came before them, not launching another ill-considered subscription pricing structure that they instantly have to revise downward and add concessions to. Upgrade pricing should be a given. Annual discounts should be a given. Your new annual TCO should be easily justifiable. And, especially where "The Cloud" is involved, moving to The Cloud should add a tangible benefit, not just be bandwagoning and added overhead.
I don't think subscription models will work for most consumers if the software is not essential or there are good quality equivalents. If each developer is working with this model it's hardly affordable. Good article though.
And i agree with most users, price is far too high.
Obviously it has its pitfalls, but speaking in very general terms, I'm actually okay with this service model. If it levels out my spending to a consistent, predictable amount, rather than having to scramble to come up with a big wad at every xyz upgrade interval, and makes updates and improvements more constant, and it doesn't result in my spending a whole lot more money than I would've otherwise spent over the course of an ordinary upgrade cycle (a little bit more can be okay), then what's the problem? This is all boon for me! Take office 365: for $120/yr, I get a five lisence copy of some package that is higher than the base package (which itself would cost more than $120) plus a TB of OneDrive, AND I get instant access to upgrades and refreshes, both big and small. Whereas with the big up front upgrade cost of the old purchase model, I may be a year or more late to the party, if I even make the jump at all. Heck, in 2014, I was still running Office 08 on the Mac, and Office 07 on Windows! I wish I could do the same with XBLG and PS+, though I understand they are beginning to move towards offering things like that, so maybe by next renewal time, it'll make sense to convert. Of course, if this raises the cash needs in an ordinary budget cycle then the number of services I can support will be pretty finite. But then, I suppose the same would be true of buying a whole bunch of programs over the year, though that eventuality seems much less likely than the former - especially if at some point, I make a willful decision to jump off the upgrade/service "ship" and stay with what so have. There's no mechanism for that with many of these services. So again, I see the pitfalls, sure. But I also see the promise. And that promise is often to my benefit, so I certainly can't say I oppose it big picture. Peter said it right [paraphrased]: When its done right, everybody wins. When it's done wrong, the customer loses. Cheers!
I don't have a problem with subscription services in general (I subscribe to a few), but this seems way overpriced. I won't be making the transition. I dot think I ever utilized it fully, anyway. Good news is I don't feel the need to upgrade these apps any longer.
Time will tell if this works well. Overall a pretty risky experiment and seems to imply that Smile is tired of servicing this app. So, they just do something ridiculous like this because they really don't care if it succeeds. Hard to tell if they really don't understand the market or if they really do. Could argue either way depending on what ends they are working towards. My opinion is with the concensus....this price is totally lucacris. 9.99 per year is very generous.
$5 a month for any app is ridiculous to me. Think about international markets. It coverts to a lot.
Good to see you back on iMore Peter! Even if it is just a one time thing. "There's no gun to your head to upgrade, if you're an existing TextExpander user. Your version of TextExpander still works. You got what you paid for. Just don't expect too much more in terms of new features or new operating system support unless you migrate to the new product." My only problem with this is not getting updates whenever OS X updates. So, subscriptions aside, depending on when Text Expander was purchased, the buyer stands a real chance of that purchase only being good for a year at most. I wouldn't expect the dev to ensure it will be updated for future OS versions indefinitely but there has to be a baseline established like say 5 years or until Apple does a major OS revision. One could make the argument that Mountain Lion > Mavericks and Mavericks > Yosemite were pretty major but considering the limited focus of the application's interaction with the OS, forcing a paid version upgrade seems a bit preposterous. And by the way, I'm looking directly at Parallels when I say this!

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