The End of Purchased Software (Updated)

by Steve Wildstrom   |   March 6th, 2013

For Rent and For Sale (© Kristina Afanasyeva - Fotolia.com)Buying software has always been an illusion. When you bought a program in a box, it seemed like you were purchasing something like a book or a music CD. But if you looked closely at the terms and conditions you had to agree to before installing program, you realized what you really had was a conditional license to use the software in ways the seller deemed proper.

For most people, this was a distinction without much of a difference. You could do pretty much what you wanted with the software, even sell it used (though you might run into trouble with a package that used an activation key.) That may be why hardly anyone bothered to read the terms & conditions.

But now the illusion of software ownership is fast disappearing. The big change is Microsoft moving to a subscription model for Office 2013. Yes, you can still buy the software (or more properly, buy a perpetual license to use it). Microsoft Office 2013 Home and Business (Word, Excel, PowerPoint, OneNote, Outlook) costs $220.The Professional version costs $399 and adds Publisher and Access. Office Home and Student. $140, subtracts Outlook and, at least technically, may not be used for commercial purposes.

These prices offer a lot less value than earlier editions. You used to be able to activate each copy of Office on two computers.These were supposed to be a desktop and a laptop, but this license requirement was not enforced in practice. And if you replaced a computer, you could uninstall Office fromt he old system and activate it on the new.

No more. All editions of Office 2013 are licensed for a single computer and are tied to that system forever. (Microsoft has the technical means to enforce that, though it remains to be seen how rigorously they will do so.) SEE UPDATE BELOW.

Microsoft is making it very clear through these unattractive terms that it doesn’t want you to buy software anymore. It wants home users to spend $99 for an annual Office 365 Home Premium subscription that offers all of the core Office applications on up to five computers (Windows or Macs). The package also includes 20 gigabytes of SkyDrive storage and 60 minutes a month of Skype calling. Like the old Home and Student version, commercial use is theoretically prohibited. Business versions come in a complex variety of plans depending on the number of seats and the applications and back-end services covered. but the basic Small Business Premium offering, which includes hosted Exchange email and Lync conferencing, costs $15 per month per user for up to 25 users.

Microsoft is making it clear through these unattractive terms that it doesn’t want you to buy software anymore.

Microsoft is hardly the first software company to go down this path. Last year, Adobe rolled out its Creative Cloud, a subscription service for its Creative Suite applications, including Photoshop, Dreamweaver, Audition, Premiere, and other creative tools. Access to the full CS6 suite on up to two computers simultaneously costs $50 a month on an annual contract; a single application is $20 a month.

Get used to this. Software vendors, Microsoft in particular, are recasting their business models to become service providers. Microsoft no longer want to just sell you Office; it wants you to use Office as part of its rapidly growing cloud infrastructure. If you are a small- to medium-sized business, someone who in the past might have been a Windows Small Business Server customer, it want to sell you hosted SharePoint for collaboration; hosted Exchange for mail, calendar, and contacts; Lync for conferencing, and anything else it can dream up. And it wants to stay a step or two ahead of Google Apps for Business, a cheaper, but in many ways less capable, offering.

None of this is necessarily a bad thing for businesses or consumers. If you had been in the habit of upgrading office every three years or so, as Microsoft brought out new versions, an Office 365 subscription could end up being less expensive than the old purchase model, especially if you want to install the software on more than two computers or if you have a mixture of Windows PCs and Macs.

My main concern is with making sure the system works smoothly. When you subscribe to Office 365, the programs reside on your computer and there are no issues working offline. However, since Office is only licensed for as long as your subscription is current, it has to check your activation status with a server from time to time, and this process can go awry. Adobe, which has been checking activation status of its creative apps for years, has had occasional problems with activation servers that have led to software becoming temporarily unusable.

Another issue is what happens if the company from whom you rent your software goes out of business or stops supporting a product? Adobe recently did provide for permanent activation of some very old versions of Creative Suite for which it wanted to shut down the activation servers. It’s a far-fetched worry that Microsoft would ever leave Office users high and dry, but it is worth thinking about since you could end up  with unusable software and files in an unsupported format.

UPDATE: The policy of tying purchased copies of Office 2013 to a single computer forever met immediate resistance from customers and didn’t last long. In a March 6 post to the official Office Blog, Microsoft announced that purchasers would be allowed to transfer the software to a different computer and that the original purchaser of a copy of Office would be able to sell it, provided the purchaser agreed to the original terms and conditions. However, activation is still limited to one computer, not the two allowed for previous Office versions. (Tip of the hat to Ed Bott of ZDNet for flagging the change.)

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • Defendor

    @ “Buying software has always been an illusion”

    No. That is what some software developers have been trying to make us believe, while trying to do an end run around our first sale doctrine rights, with questionable EULA text they attach to their products.

    They have been attempting to subvert or first sale doctrine rights, and introduce onerous usage conditions, and vexatious taxation on using the products we buy.

    You really shouldn’t just cede them this claim.

    • Glaurung-Quena

      Have Software EULA’s ever even been tested in court as to their legality?

      • steve_wildstrom

        Yes, and they have generally been found enforceable in the U.S. Specific EULAs have been struck down on specific points of contract law, but courts have had no difficulty with the concept in general.

    • steve_wildstrom

      Sorry it’s not me, it’s the legal system. U.S. courts have had no problem with the idea of a software “sale” being just a license to use under specified terms and conditions and have never invalidated a license that restricted resale on first-sale grounds.

      • Defendor

        You said this has always been the case. Which it is wasn’t.

        Corporations have all the money/time/lawyers/super pacs/lobbyists on their side. So eventually they will buy the laws they desire.

        But it wasn’t always the case. It is only in the last couple of years that they have been successful killing First Sale Doctrine rights.

        States have been passing onerous laws for selling used CDs. It is more difficult to sell used CDs than guns in some states.
        http://arstechnica.com/tech-policy/2007/05/record-shops-used-cds-ihre-papieren-bitte/

        • steve_wildstrom

          Corporations can negotiate better deals. My guess it was corporate resistance that caused mMicrosoft to abruptly change the licensing terms today (see the update if you haven’t read it.)

          But changing the law is very, very difficult. This is common law and the Uniform Commercial Code. There was a major effort a few years ago to modernize the UCC to deal with the digital era but it went nowhere because there were too many conflicting interests within the business community.

  • Glaurung-Quena

    ” It wants home users to spend $99 for an annual Office 365 Home Premium subscription that offers all of the core Office applications on up to five computers (Windows or Macs).”

    $99 per year forever, or, I could go to Ebay and buy a copy of office 2003 or office 2007 for significantly less than that and never have to pay them another dime. And of course there’s openoffice and libreoffice, both available for nothing. Somehow I suspect that this scheme is going to backfire on them badly.