Custom Website Subscriptions: The Ant at the Picnic
In 1999, Salesforce launched the first version of its now-ubiquitous CRM.
Software industry heavyweights ridiculed them (Business Insider even fired at Salesforce in an article titled “The Ant at the Picnic”) because of their radical approach:
[Salesforce] was founded on a single, bold premise – that software should be made available to the masses, on a 24/7 basis, over a global cloud computing infrastructure. […] The future, as a prescient Benioff saw it, would be a world where companies could buy software outside of their own buildings, at lower cost and equal or greater efficiency, and have everything stored on an external cloud. (source)
As I’m sure you’ll recall, it was standard to purchase software through an expensive one-time license in those days. You installed the software on computers owned and maintained by you and re-purchased new licenses when the vendor released a new version.
Salesforce revolutionized this model by offering customers a more efficient and straightforward way to use their software. Customers paid a monthly or annual subscription fee for access to their software over the internet. In exchange, Salesforce would provide the computing infrastructure to run the software and maintain and improve it over time.
Now, Salesforce is worth nearly $300B, and the software subscription model is universal. In fact, I’m willing to bet your nonprofit purchases 95% of its software through a subscription.
Now let me ask you a question:
Why does the social sector continue to purchase websites on what is effectively an expensive license model, buying and re-buying them repeatedly when a new version is needed?
Why websites are stuck in a one-time license model
Let’s examine a few reasons this is the case:
There is little established precedent for this in custom software. We are used to subscribing to software delivered in a 1:many model—you pay for the same product for which 100,000 other subscribers are paying.
In a sense, some websites have moved to a subscription model. Website builders such as Wix and Squarespace have allowed small nonprofits to build what would have been a custom website ten years ago.
But beyond website builders, the precedent for decades has been to make a single, expensive purchase when you need a custom website.
Some organizations don’t want to be tethered to a developer. Maybe they have in-house technical staff that can maintain their website or just had a poor experience with a past developer. These are valid reasons to eat the cost of software upfront. (Although it’s risky—unless you have in-house capabilities to maintain the site, its usefulness quickly depreciates over time.)
Agencies and development shops don’t offer this option. Frankly, a professional services firm realizes its profit sooner by collecting hefty project fees and chaining big projects back-to-back. That’s one reason almost no one will give you a proposal with a subscription option if you put out a bid for a new website.
I’m sure there are other reasons I’m missing, but these are the main ones that come to mind.
What a subscription model might look like for custom websites
Let’s buck the trend for a minute and imagine some different subscription-like models for a custom nonprofit website.
In these scenarios, let’s imagine the organization needs the equivalent of a $100,000 website—fairly expensive by the standards of many small-to-medium nonprofits.
The Finance Model
There are times where it may not be practical for a nonprofit to pay a lump sum of $100,000 for a website. However, they might be able to fund a line item of $6,000/month in their budget. The firm developing the website agrees to this, but with a longer contract length, 24 or 36 months.
Those who passed elementary school math will notice this is more expensive than paying for the site upfront. The firm developing the website has effectively agreed to finance the initial build for the nonprofit and maintain and improve it over time for a higher fee.
For some nonprofits, the option to sit on their cash, see their site grow, and bypass a lengthy capital campaign will be a win/win arrangement.
The Lease Model
Now imagine $6,000/month is still too expensive. Say the nonprofit can only budget $4,000/month. The development firm agrees to this budget in exchange for retaining the rights to the site.
They propose developing the site and leasing it back to the organization to meet their budget. Purchasing the rights to the site would cost the equivalent of one year of lease payments after a 36-month term.
Clearly, this model comes with several downsides—namely, the nonprofit does not own an essential piece of its marketing infrastructure.
However, it may be attractive to a nonprofit that anticipates rapid growth contingent on a robust digital footprint. The nonprofit effectively gets to push a few growth levers now and pay for it later. And perhaps in 36 months, they can develop a new site and cut their lease.
The Distribution Model
Now let’s imagine a nonprofit sees an opportunity to develop a web platform that itself and other organizations could use. (Open Y is an excellent example of how The Y did this for YMCA websites.) They decide to create a “distribution” that functions as a standard template and feature set that each organization can customize.
A few organizations partner together to fund this web platform collectively. Each nonprofit contributes $2,500/mo to create the distribution (using the Finance Model), deploy their version of it, and fund ongoing development and maintenance.
It takes more collaboration than developing a web platform for a single organization, but the cost defrays between multiple entities, and everyone owns a technology asset.
My intent with this piece is not to abolish lump-sum project fees. I don’t think we’ll ever reach a point where, like Salesforce, all custom software projects have monthly subscriptions, and I don’t think every organization wants that.
Instead, my objective is to encourage our sector to expand its thinking about paying for custom software. To poke at the conventions and demonstrate how different ways of thinking have met with success in other sectors. Hopefully, one day the nonprofit sector will witness more websites developed on a subscription model.
Until then, I’m content to be the ant at the picnic.