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Applications for a buck…or less even

by Tom Austin  |  February 5, 2009  |  3 Comments

David Pogue’s (excellent) blog posting today on the impact of Apple on software industry business models (think iTunes, not Safari) rekindled some of my thinking about how the cloud has the potential to radically change software business models.

Let’s step back to Christmas Day, 2008. On that date (25-12-2008), according to the U.S. Patent and Trademark Office (USPTO), Microsoft filed a patent application (Number 20080319910) for a “metered pay-as-you go computing experience”. (This patent application was part of two, one for the business method and related software and the other for some form of hardware enforcement to go with it.)

Microsoft’s patent application describes how it could sell software functions to users – they need not buy “the whole application” – and the users could pay by the function and how much they used the function. This would give the user the chance to only pay for what they used. So, I’ll conjecture that one might have to only pay $0.10 to use an Excel pivot table (or $0.01 to use a simple date series calculator) one time. (These numbers are just my illustrations, not any inside information I may have gleaned from Microsoft or any other source.)

This puts Microsoft (or any other vendor using a similar method – I’m not a patent attorney so I’m not passing any kind of judgment about patentability or enforceability) in the business of letting people access code and data from any arbitrary device without having to actually have a license for the full blown software package on every device one might use.

Remember, with Xbox, Microsoft is in the business of selling third party software already – the XBox ecosystem includes the Xbox Live marketplace which sells or rents (and distributes) games, add-ins, videos, promotional content and other things – and the intellectual property is from the entire Xbox ecosystem, not just Microsoft.

There are a lot of different future scenarios I could paint.

Given that the number of intelligent computer-like devices each of us will own and use is going to continue to grow, we need a way to separate the use of software capability from a specific machine (while still paying the owner of the IP for using their work).

Someone could establish themselves as “the distribution point” for software (think iTunes for the universe, not just iPhones and iPods and other Apple gear).

Microsoft already distributes a kit to almost every manufacturer of every PC in the world – and the kit contains operating system and application bits. Microsoft could decide to use that kit to sell software functions from anyone to anyone, compensating the owners of the IP – and the device manufacturer who delivered the fatter kit – for their troubles.

That’s one way – certainly not the only one – through which we can begin to get out of the software business models designed in the 1980s that many of today’s products are burdened with.

What do you think?


Tom Austin
VP & Gartner Fellow
20 years at Gartner
41 years IT industry

Tom Austin, VP, has been a Gartner Fellow since 1997. He drives Gartner's research content incubator (the Maverick Program) and is leading a new research community creating research on the emerging era of smart machines. Read Full Bio

Thoughts on Applications for a buck…or less even

  1. […] colleague Tom Austin, in his post Applications for a buck…or even less, explores the potential impact of cloud computing on traditional software business models. In […]

  2. First off I don’t think Microsoft’s patent application will survive the particular machine and transformation tests of Bilski. But regardless i think the bigger issue here is whether we can apply the successful iPhone app store model (or ringtone business) to traditional software applications. I think there are some major impediments to that happening. I’ve put those thoughts into my own blog post:

  3. Cloud computing is heading in exactly this direction, but for the business datacenter. Applications and virtual appliances will just be images that you pull into a virtual datacenter and pay for as long as you need them, or perhaps based on how much data goes through them. Think of a Barracuda spam/AV filter running on a private cloud network in front of my Exchange server. How do I pay for it, and who do I pay. I might pay per email, per MB, and I would probably pay my cloud hosting provider, who would make 15-20 points on the deal.

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