Big Business carves up the internet – part 2

I had intended to return a lot earlier to my discussion (see part 1) about how major IT companies are trying to lock in users through the vertical integration of their software, the introduction of annual or monthly subscriptions to replace perpetual licensing of their products and by reducing the interoperability of their competing software “eco-systems”. All these strategies have major consequences for the future of the internet.

It had been my intention to look at how some smaller software companies had reacted and the consequences for councils, NGOs and small organisations. Well, while it’s no excuse for the long delay, the intervening period has seen some interesting shifts and a change of heart by one vendor.

The primary example I was going to choose, Mindjet, had caused huge angst in its user community. Mindjet has the largest customer base among sellers of mind mapping software. After dabbling in the provision of a “lite” online version which allowed mind maps to be shared and edited collaboratively and the acquisition of a number of web-based task management software, Mindjet with little warning moved its entire product line to a subscription model, a decision that angered many users as much as for the way in which the changes were made as for their intention.

The problems in execution were many. First, the company intentionally or otherwise let its resellers leak the news to users instead of announcing it publicly themselves. The cost of the subscriptions was relatively high – in some jurisdictions users would be (and are) paying more annually than they would for Microsoft Office 365 subscriptions, which include the entire Office suite. And unlike Microsoft, Mindjet was also not offering a perpetual licence alternative. In addition Mindjet’s package had a cobbled-together feel about it; while the flagship Windows desktop program MindManager (confusingly renamed Mindjet) is excellent and the online version is adequate, the versions for Mac and mobile devices are feature-poor and the overall integration of all these elements with each other and the new task management application is still patchy.

The new model and its poor implementation brought a strong reaction from customers, especially individual users and those in companies that were trying to promote mind mapping to their colleagues and superiors. I won’t go into the impassioned pleas by and lively arguments between MindManager aficionados (like me) which can be read online (for example, here), but I think it is fair to say the company was unprepared for the reaction. It responded in a number of ways, for example offering one-off discounts for existing users, splitting the company’s offering so that desktop users who didn’t need the online services didn’t have to pay for them (and vice versa), but these concessions did not satisfy many users.

The company’s position was further undermined when it was revealed that it was still offering perpetual licences to academic and government users, some with substantial discounts, despite forcing retail purchasers to move to the subscription model. Mindjet’s Account Services Director admitted this, but would not discuss the reasons, stating somewhat bizarrely that: “Company policy prohibits me from providing a more detailed public explanation of pricing strategy”.

Then a few weeks ago Mindjet suddenly and quietly ran up the white flag. A link appeared on its website, offering a perpetual licence combining its Windows and Mac desktop products for an introductory price of US$299 (reduced from $349) or an upgrade price of $179. The perpetual licence version has reverted to the old name of MindManager, though the product appears to be identical to the subscription version which keeps the new name of Mindjet.

There are a number of interesting lessons to be learnt from this for other companies contemplating going down this path. The first is that user responses to controversial change can be mobilised very effectively in an online era, even if the impact is very uneven. Smaller more specialist businesses like Mindjet are much more likely to be hostage to their users than companies the size of Microsoft.

Second, execution matters as much as intent. If Mindjet had been more open with its users, if it had waited until it had improved the individual products in its “basket” and ensured that they were properly integrated it might have received a more favourable response to the changes. The implementation was also flawed by trying to charge too high a price for the subscription version; like it or not, even if you are a small company offering a specialist product, people will still compare the price of your package with those offered by much bigger companies like Microsoft. And even Microsoft did not go so far as abandoning perpetual licences all together.

The third lesson is that you really need to understand that the subscription model may not suit all your current or prospective users. Obviously Mindjet was hoping to parley its success in specialist desktop mind mapping by expanding into corporation-wide task mapping and management. Whatever the intention, the new subscription model did little to address the needs of the “traditional” individual users who make up a significant proportion of its current market and who often proselytise the benefits of mind mapping to and within these companies. Many users also disliked the prospect that they would be unable to access or edit their maps stored on their own PCs or their company’s servers after the subscription ran out; at least with Microsoft Office there are many third-party products that will read and write Office files.

The counterpoint to this is the fourth lesson; the need to really understand what you are letting yourself in for when you try to expand into a new market. Mindjet’s desire to expand beyond the confines of the fairly specialist field of mind mapping is understandable, but its new “battlefield” of corporate task management is a very different ballgame. There are already a number of established players in this area, and the prospective clients are likely to want much more mature and stable products than Mindjet’s offering, even if it has the attraction of a map-based interface.

The fifth lesson is that you have to avoid hypocrisy in dealing with your customers. If Mindjet had adopted Microsoft’s “carrot and stick” approach of making the subscription price very attractive but also offering a perpetual licence at a less attractive price most users would have grumbled but gone along with it. They will also accept differential pricing for bulk purchases, particularly in the government, education and non-profit sectors. What they really dislike however is any attempt to restrict their ability to purchase a licence in a particular way while another class of user is allowed to continue clandestinely with “business as usual”.

The sixth and final lesson is learn from your mistakes. Mindjet have backed down and made a perpetual licence available. They have also to their credit allowed these issues to be debated openly in forums linked to their website (though I notice they have now moved some of the more controversial threads to the relative obscurity of the archive section). The process and the outcome still have a messy feel about them however and it is unclear how Mindjet will tie up all the remaining loose ends.

A couple of final observations: it is understandable that many software providers are attracted to the subscription model. It reduces delivery costs, guarantees repeat business and makes it easier to roll out updates. However it will not suit a number of customers, especially many individual users. It also doesn’t suit those who make only occasional use of a program and who are therefore prepared pay for updates only every two or three years instead of being locked into annual or even monthly renewals.

More importantly, software companies have to realise that by itself the subscription model is also an inadequate response to the biggest threat may of them face from new players in the marketplace – the rise of the app, usually tied to a mobile device, which undertakes only a specific set of tasks but does these well and at a fraction of the current price of traditional software. The appearance of the app is a paradigm shift which could make arguments over the competing virtues of perpetual licence and annual subscriptions for large software packages largely redundant, along with the companies making them.

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1 Response to Big Business carves up the internet – part 2

  1. Pingback: The software subscription model: will consumers buy it? | Sociamind

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