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Comment by philpem

6 years ago

The other reason is how it looks to business customers.

Buying a piece of software (one-off) almost always requires budgeting and capital-expenditure approval. Add in the mess of depreciation calculations and maintenance fees, and it's just a mess. Can be weeks of work just to buy £200 worth of software.

A subscription service usually gets budgeted and booked as recurring expenditure, and looks better on the balance sheet.

In some environments (esp. the public sector) recurring (AKA "operational") expenditures are a lot harder to justify than capital expenditures.

An OpEx increase requires an increase in budget paid for by taxes, while CapEx can be covered by a one-time bond.

This leads to paying vendors millions for a software+support contract rather than hiring a few engineers.

Taxes might be different too. our municipality taxes my wife's biz as a percent of biz capital (US)