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Goodbye, Shrink-Wrap:                    Software for Rent

S E C T I O N S

HE LOVINGLY WORKS on the school's air-conditioning system. He traps the badgers that burrow into buildings on campus. Montz meets software bugs in his computer—the ones that would make most of us curse like sailors—with the same sense of adventure and delight. It's a day off for him, but he wakes up every Saturday at 5 a.m. to get the latest software fixes and patches and to run performance tests, cleaning his hard drive of any digital jetsam left over from Web surfing. "It is a pain in the a—," Montz admits. "Everything around me is constantly broken. But I like it."

But lately, Montz has been using a Web site called McAfee.com; it's so helpful in maintaining his PC that he can even forgive it for making his life easier. He once bought three separate computer programs that together cost roughly $50 to ensure that his system was up to date, inoculated against viruses and protected against crashes. Now he gets all those services through the Web site for an annual fee of $29.95. Besides money, he saves acres of space on his hard drive. Because McAfee.com has to upgrade only its service, not individual copies of software, Montz doesn't need to install anything.
Most of us respond to the complexity of computing with the kind of dread only dentists, the IRS and Brussels sprouts inspire. But the software makers, who break more promises than campaigning politicians, have teed up yet another big pledge: to take the anguish out of software by offering it for rent. The days of lengthy and torturous installations, relentless bugs and immediate obsolescence will one day, they say, be a repressed memory. Free yourself from the death spiral of hardware and software upgrades. Forget about waiting on hold with customer support, subjected to a bigger lie than pledges of tax cuts: Your call is important to us.
If all goes according to plan in the coming year or so, you could even throw your PC out the window. All you will need is one of the new cheap Internet appliances, such as a digital TV set-top box. Drives for floppy disks or CD-ROMs? Not necessary: you won't be installing anything.
Consumers are not the only ones who will benefit. The business world has been increasingly renting applications instead of buying them, saving the high cost of upgrades, installation and maintenance. The efficiencies of the rental market have led some Wall Street analysts to predict that such software services, or application service providers (ASPs for short), "will be key to the growth of our global economy over the next decade." Traver Gruen-Kennedy, who heads an industry consortium of ASPs, thinks the new purchase method barreling toward the consumer market could lower the cost of computing and "fill the digital divide, increasing the audience for computing."
Software landlords are springing up everywhere. Established brands like Intuit are letting users rent TurboTax online. New entrants such as cMeRun, Media Station and Personable.com team with Internet service providers to lease well-known software titles for flat monthly fees. To boost sales, computer makers are building new "appliances." And companies that provide high-speed Net connections are desperate for anything that gives users reason to upgrade their lines. Earlier this summer Microsoft said it would make all its applications Net-ready for this kind of usage. "We will not be, none of us, delivering software products in 10 years," predicted Microsoft's spring-loaded CEO, Steve Ballmer. "All software products will evolve to be a service."

It's easy to see why companies are so eager to shift their software from shrink-wrap to the service model. The pace of software development is so fast that by the time a product hits store shelves, it's already in need of re-engineering. By streamlining their efforts to a single version that runs on their own servers, they could remain compatible with the more than 200 million non-PC Internet devices expected in three years. Electronic delivery of software would also line their pockets. Software makers won't have to give away roughly 50 percent of the purchase price to retailers and distributors. Finally, if users don't own software, they can't pirate it. The old way of selling software, says Into Networks vice president Bill Holding, "is fundamentally broken."
That's not exactly news to consumers. Bob Day, a Coast Guard officer in charge of computer systems in New England, has to maintain 2,500 computers and 70 servers. He's in a "constant struggle" to keep the mail and operating systems running smoothly—no easy task, considering, for example, that there are about 130 patches, fixes and additions to the last two versions of Microsoft Office. Windows 2000 alone has "security updates" and "critical updates," programs to install the programs and programs to assess the potential problems with installing programs. "If you bought a car as buggy," he says, "you'd get a recall notice." He's already found a viable solution for his other big headache: his kids' insatiable appetite for new computer games and tendency to orphan them days later. MediaOne, the cable company that provides his high-speed connection to the Net, offers access to Into Networks' Playnow.com service. It's pay-per-view software: $2.99 for 48 hours of usage of a specific title, or $9.99 per month for access to more than 200 programs. IBM, for example, plans to make its Lotus suite available in the fall. But Day favors the game titles; the family pays only for what it uses.
Most people who buy software pay for features they don't use. Mike Schrag, a 22-year-old software programmer in Richmond, Va., uses Thinkfree, a service that offers a word processor, spreadsheet program and other productivity applications (the "standard" service is free; extra features like more storage space, ad-free usage and automatic backups cost $25 a year). But unlike most software programs, Thinkfree users can download only the pieces they need. "It's not nearly as bloated as Office," says Schrag. Adds Ken Rhie, Thinkfree's founder: "When it comes to shrink-wrap software, you get an incredible collection of kitchen sinks."
Beneath the promise of reducing complexity and costs, there are still devilish details. Some analysts think consumers, hit up for monthly fees, will certainly spend more than they would for one-time purchases. Other observers see the staggered pricing simply as a reshuffling of charges. "We've been renting all along," says big-thinker Paul Saffo of the Institute for the Future. Relatively few households have the kind of speedy connections often required to run software programs remotely. And many consumers are skittish about storing critical files out in the digital cloud. Mary Dockery, general manager of a radio station in San Antonio, Texas, used McAfee.com to salvage her computer after a virus put it on the brink of the grave. But she wouldn't use rentable word processors and spreadsheets for fear that a hacker could reach them 24/7. "It's not like putting your money in the bank and getting a receipt for it," she says.
Most software landlords dispute the downsides. They make assurances that such a fundamental shift toward renting software will be a "win-win" proposal, an omnibus cure that's good for everybody. It's the kind of pledge—might as well be "No new taxes"—that we've heard before. And though the idea's time has come, it's the kind of massive upgrade that's never as smooth, speedy and glitch-free as the scions of software think.

© 2000 Newsweek, Inc.

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