[Disclosure: I'm the author] No argument that up-front, perpetually licensed software is currently a huge, profitable business. Windows and Office alone, as acknowledged, generate essentially $44B by themselves. There are also profitable businesses that pursue the traditional perpetual license model - Palantir being perhaps the most notable example (although from conversations with employees there, they are increasingly being pushed towards alternative models).
But the point of the Software Paradox is not that companies are not currently and cannot in future make money from software, and that there are no exceptions to the rule, it's that the trajectory broadly is not promising. Looking across a variety of software categories, from mobile to operating systems to infrastructure to tooling to consumer, the trendline is downward in terms of their up-front realizable revenue potential.
None of which should be taken to mean that software is going away. If anything it's becoming more important, hence the use of paradox. But developers and companies seeking to monetize software should at least be aware of the market context which is that it's becoming more difficult to make money from it the way that it was possible to even a few years ago. Even the lock-in mechanism, which is correctly cited as a method proven to monetize customers efficiently, is more easily replicated in services businesses (e.g. cloud) than it is in traditional on premise software, where open source has become both an expectation and a means of combatting lock-in.
If one looks at all of the available evidence and decides to proceed with a traditional software licensing approach in spite of the observable challenges, it is certainly not impossible for them to a) generate revenue and b) be profitable. But the degree of difficulty attached to this model has gone up considerably, and looks to only be getting worse. And this isn't just an academic theory, it's something I hear almost daily in conversations with vendors.
Appreciate your clarification. I agree that the overall trajectory is not promising in the mass market. What are your thoughts on the pay more for quality or security market for software/systems? Have those analyzing the data made this distinction to see how much the trend affects that market segment? Many that I know of still use the old model's of licensing or expensive appliances although the startups are doing things with new models. I think, if that niche had same effect, it would reinforce your claim even more. If it wasn't as impacted, it would give the best spot to invest in and market apps with profitable, licensing models. What I often called the Toyota Strategy.
"Even the lock-in mechanism, which is correctly cited as a method proven to monetize customers efficiently, is more easily replicated in services businesses (e.g. cloud) than it is in traditional on premise software, where open source has become both an expectation and a means of combatting lock-in."
I'm actually starting to agree with this more and more as I look into how they design it. Facebook is the perfect example: containing people's whole life with no easy way to move it. The cloud vendors usually allow unlimited incoming data and charge for outgoing. Tricks like that combined with low, entry barrier might make for nice lock-in over long term.
"But the degree of difficulty attached to this model has gone up considerably, and looks to only be getting worse. And this isn't just an academic theory, it's something I hear almost daily in conversations with vendors."
Oh, like I said, I buy that. Title just read like another piece on how that type of software was done altogether. The claims about the trend in the book and your comment are right on. I guess you could say that's what I really was griping about. ;)
But the point of the Software Paradox is not that companies are not currently and cannot in future make money from software, and that there are no exceptions to the rule, it's that the trajectory broadly is not promising. Looking across a variety of software categories, from mobile to operating systems to infrastructure to tooling to consumer, the trendline is downward in terms of their up-front realizable revenue potential.
None of which should be taken to mean that software is going away. If anything it's becoming more important, hence the use of paradox. But developers and companies seeking to monetize software should at least be aware of the market context which is that it's becoming more difficult to make money from it the way that it was possible to even a few years ago. Even the lock-in mechanism, which is correctly cited as a method proven to monetize customers efficiently, is more easily replicated in services businesses (e.g. cloud) than it is in traditional on premise software, where open source has become both an expectation and a means of combatting lock-in.
If one looks at all of the available evidence and decides to proceed with a traditional software licensing approach in spite of the observable challenges, it is certainly not impossible for them to a) generate revenue and b) be profitable. But the degree of difficulty attached to this model has gone up considerably, and looks to only be getting worse. And this isn't just an academic theory, it's something I hear almost daily in conversations with vendors.