Web Apps: Addressing The Switching Costs

office-google.jpgI am a firm believer that the future of software is internet-based web applications. We will continue to move from software you buy and install on your computer to software that you rent and run over the internet. Vinny Lingham had a great post this week about the top 20 reasons web apps are better than desktop apps. Now, this is the shared vision for the future of software for many of us, and while the early adopters are moving online, we are still waiting for the masses to begin their migration towards web apps.

Back in microeconomics we studied switching costs, which loosely defined means the cost that a consumer incurs when switching from one supplier to another. The calculation of the switching cost to the consumer to move from desktop software to web applications is more complex than just the different pricing models of the two. In almost all cases, web applications are far cheaper than desktop applications, if not free. However, it is important to understand that price is not the only switching cost incurred by consumers.

Mitigating Consumer Switching Costs Incurred in Moving from Desktop to Web Applications

  1. Pricing & Ownership - One of the first things people have to get familiar with is the idea of not owning the software they use. They no longer buy software, they rent it. If they stop paying, they no longer have access to it. This is inherent in shifting the idea of software from a product to a service. Shifting the consumer’s mindset is a key to success, but it is also important to realize that there is a cost to the consumer to move from desktop apps to web apps.
  2. Free & Trial Subscriptions – Make it easy and free for your consumer to try out your software. Build a freemium business model. Make it just as easy to cancel as it is to upgrade. Keep in mind that your customer is not just trying out your software, but the idea of software as a service. Make it as easy and painless as possible. Which leads me to:
  3. Painless Migration - Build open and compatible software. If you are building software that is about to disrupt the a certain segment of the desktop software industry, make sure you are compatible with it. Make it painless for people to upload their files to your web application. People are willing to try a new piece of software online, but there has to be a continuity with the way they’ve been working until now.

When We Feel a Switching Cost

In our office we are holding off on upgrades to the Microsoft Office 2007 in an attempt to continue to migrate our software usage online. We’re using Google Docs for our spreadsheets and word processing, and continue to use Basecamp. Next up is photo editing and graphic software. At each step we incur switching costs that reveal themselves in different ways:

  • “Hey, how do you do this on here…” – learning curve
  • “You mean this feature isn’t available?” – missing (or different) features
  • “*&#$%… my browser crashed.” – the browser bugaboo

With each of these, we learn a little more about what switching costs really mean. Our goal is to make the transition to our web application as easy as possible and to minimize the switching cost to the consumer of moving to web apps.