Ashton-Tate is taking the wraps off its new customer support and service plan today and laying the burial shroud over copy protection codes at the same time.
The Torrance-based software developer will remove the codes from all of its existing software programs, for a $45 fee. And beginning today, it will no longer ship protected software to its dealers. The codes were embedded in software programming to prevent illegal copying. But for the most part they have failed to deter piracy, and customers have complained that the codes make the programs more difficult to use.
Additionally, Ashton-Tate was scheduled, during a New York press conference today, to unveil its new fee-based service programs for corporate and individual customers. The company also announced on Monday an 87.5% increase in its second-quarter profit on a 78.2% rise in revenue.
The combination of moves represents the company's response to the changing face of the microcomputer software industry. The company becomes the last major software developer to drop the codes at least partially. Last week, Lotus Development said it would allow about 400 of its biggest customers to remove codes from existing software.
As with other companies, Ashton-Tate is risking lost revenue by making it easier for its software to be copied. On the other hand, it is sizing up the growing market for services as a way to generate additional revenue.
"The microcomputer software companies have grown far bigger than anyone would have expected, looking at them five to eight years ago when they began," said Brian Mutert, software securities analyst at Robertson, Colman & Stephens in San Francisco. The user base has grown in "geometrical fashion, and service also has to grow in that geometrical fashion to support the users," he said.
The result is that, as for copy protection, the days of free service are coming to an end.
'Going Back to Family'
Companies such as Ashton-Tate grew up in the days when personal computers were just coming into popular use, but easily used software was not. "The business," said Edward Esber, chairman and chief executive of Ashton-Tate, "was formed by a band of mavericks . . . and now we're going back to the family, following pricing and service policies that are similar to the minicomputer and mainframe business."
By adopting traditional industry practices, companies such as Ashton-Tate, Lotus Development and Microsoft--the three top microcomputer software makers--also may be emulating the revenue structure of their big-league counterparts, said Robert Lefkowits, software industry analyst at Infocorp, a market research firm in Cupertino, Calif. Companies that make software for mainframe computers (the large machines that power corporate computing) derive as much as 15% of annual revenue from support and service, he said.
Service Was Drain
Until recently, product sales have been the chief component of revenue for personal computer software companies. Service and support mostly has been a drain on revenue for software makers, and most companies have offered technical support free via telephone. A few companies, whose products are widely copied, find it difficult to screen out the pirates.
Esber said such telephone services can rapidly eat into profits. With more customers and more software products per company, the "queue times are getting longer and longer. I don't want this industry to get into the busy-signal syndrome," he said.
Some companies are now limiting telephone support to a specific period after purchase. MicroRim, the Redmond, Wash.-based maker of such database management programs as r:BASE System V, gives free telephone support to new customers for 30 days. After that, a maintenance plan could cost an individual user $175 a year; corporate customers could pay from $400 to $5,000 for MicroRim services.
Ashton-Tate's new fee structures will allow varying degrees of service by telephone, depending on the type of agreement. Individuals could pay $60 for a six-month service contract; corporations will be charged $4,000 for annual maintenance.
Similar fee structures are becoming prevalent elsewhere. The companies that specialize in inexpensive software, such as Borland International, whose programs sell for $100 or less, don't see a need or a market for extended service that could double or treble the original package price. Most others, however, have instituted fee structures or say they are considering them.
Ashton-Tate reported net income of $6.47 million for the three months ended July 31, up from $3.45 million earned in the second quarter of last year.
Revenue during the same period increased to $49 million from $27.5 million. Net income for the first six months of fiscal 1987 was $11.6 million, double the figure in the comparable year-ago period. First-half revenue totaled $90.2 million, compared to $51.5 million a year ago.