Picture the finance manager of a mid-sized manufacturing company sitting in front of a software package the firm purchased three years ago at considerable expense. The system works, but a new version has been out for two years and migrating to it means another invoice. The annual support contract renews every spring, a little more expensive each time. The company technically ‘owns’ the software, yet it keeps paying for it year after year. This situation is familiar to many SME managers across Turkey, and it is precisely the backdrop against which the idea of paying a monthly fee to simply use software — rather than own it — is beginning to make sense.
The ASP model, short for Application Service Provider, is not a new concept, but its practical viability has grown considerably as broadband connections have become more widely available. The core logic is straightforward: instead of purchasing a licence and installing the software on in-house servers, a company pays a monthly or annual subscription fee and accesses the application over the internet. There is no upfront licence cost, no installation project, and no version upgrade headache. The software vendor keeps the system running; the customer simply uses it.
For an SME, the most immediately visible advantage is the reduction in entry cost. In the traditional model, licence fees, server hardware, implementation work and consulting fees combine into a figure that can easily exceed a small company’s entire annual IT budget. Under a subscription arrangement, the initial outlay is far more modest — the firm starts using the system in exchange for a predictable monthly expense. From a cash flow perspective, this difference matters most to companies that are growing and would rather deploy capital elsewhere than lock it into a software asset.
A second practical benefit is the near-elimination of the upgrade and support problem. In the conventional licence model, moving to a new version is often a project in its own right: a new licence fee, data migration, user retraining and sometimes external consulting. In a subscription arrangement, updates are handled by the vendor in the background; a user might open their browser on a Monday morning and find the system has quietly improved overnight. For SMEs without a dedicated IT department — which describes the majority of small and medium-sized businesses in Turkey — this is not a trivial advantage.
That said, the disadvantages of this model deserve equal attention. Over a long enough horizon, the total amount paid in subscription fees can comfortably exceed what a traditional licence would have cost. Beyond the financial arithmetic, companies using this model are entrusting their data to the vendor’s infrastructure rather than keeping it on their own premises, which raises legitimate questions about data security and continuity of access. If the internet connection goes down, so does access to the system — and given that broadband infrastructure is still uneven across different parts of Turkey, this represents a real operational risk that cannot be dismissed.
The deeper transformation this model brings, however, is in the structure of the relationship between vendor and customer. Under the traditional licence model, the vendor’s primary commercial motivation is largely fulfilled once the sale closes; the support contract generates recurring revenue, but the essential relationship was established at the point of purchase. In a subscription model, the vendor is effectively re-selected every month. If the customer is not satisfied, they can cancel. This dynamic forces the vendor into a posture of continuous value demonstration: keeping the system running is the baseline, not the achievement. The relationship shifts from a one-time transaction into an ongoing partnership where value must be earned and re-earned.
For SME managers, the practical decision comes down to one central question: what is the firm’s actual capacity to manage its own IT infrastructure? A company with technical staff capable of handling server maintenance, security updates and version migrations may still find the traditional licence model perfectly reasonable. But for firms that view IT management as a distraction from their core business — and that lack the in-house expertise to manage it well — a subscription arrangement removes a substantial and often underestimated burden. Before committing, the reliability of the internet connection, the vendor’s track record and the specifics of the data security policy all warrant careful scrutiny. Under the right conditions, though, this model eliminates the hidden costs that come with software ownership and replaces an unpredictable capital expense with a manageable operating cost.
This article was originally written in Turkish by Gökhan MERCANOĞLU on May 8, 2006 and has been automatically translated into English and other languages using machine translation.