Caveat Renter

Renter beware. I've heard a number of technology companies lately extol the great virtues of renting—both hardware and software. They sell the concept to their investors and shareholders and talk about the wonderful revenue stream they will build. And I'm afraid that is all that they see. As such, they are doomed to failure. There will be a backlash, mark my words. The thing is, as pointed out in Infoworld,

But we don't see any vendor propaganda promising that we'll save money by renting.

In fact, companies moving to rental are missing a fundamental rule of business—the customer is king. The whole point of capitalism is that the absence of compulsion means that you have to win customer dollars by providing something people want. And the bottom line here is that nobody wants to rent. At the very most fundamental, nobody wants to rent unless doing so is significantly cheaper than buying. Not just a little cheaper, significantly cheaper. Renting means that someone else has control over your destiny. It means you do not own the tools that make your business run. In something like IT spending for businesses in particular, where change represents significant cost, you do not want to be dependent on another company for the continuing good function of your computer systems. It is suicide. And Ed Foster at the same magazine says similar things about "maintenance" contracts which is rent on the back side.

Companies aren't going to agree to draconian rental policies just because tech companies want them to. Even when they want them to really badly and they prattle on about bug fixes and free upgrades.

  • Fact, free upgrades won't happen—companies will invent new names and split upgrade paths to, well, generate more revenues.
  • Fact, bug fixes aren't going to happen any faster with rental agreements—you can guarantee that companies won't bump spending on support and programming just because they have more revenues coming in.
  • Fact, new revenues will go to new programs, new initiatives, and new products to generate new revenues.

Consumers are not stupid. Companies who see their customers as walking revenue streams have lost the focus that made them successful in the first place. You build revenues by accurately identifying the wants and needs of your customers—not by accurately identifying their budgets. My advice? Avoid tech companies with great plans for rental revenues like the plague—not only their products, but I'd stay away from their stock, too. The resentment of their customers will rebound and they will end up the worse for it.

Technorati Tags: ,,
13. June 2002 10:34 by Jacob | Comments (0) | Permalink

Calendar

<<  March 2017  >>
MoTuWeThFrSaSu
272812345
6789101112
13141516171819
20212223242526
272829303112
3456789

View posts in large calendar