Automatic Renewal Fees May Cause Trouble for Small Businesses
By Robert McMillan and Jonathan Hopfner
Users frown upon automatic fees
Switching vendors become harder with subscription plans.
It took Michael Kelly just minutes to buy McAfee's software. But getting the US-based anti-virus vendor to stop charging his credit card was another matter altogether.
McAfee is on the vanguard of a new trend in the security software industry: selling software as a service that is automatically billed each year. McAfee began automatically renewing customers in 2001, but over the past year the practice has become much more common, as Symantec and Microsoft, with its new Windows Live OneCare products, have adopted automatic renewals.
The vendors say these programmes are good for consumers. As many as two-thirds of anti-virus users postpone their subscription renewal, leaving their personal computers (PCs) unprotected from the latest attacks, they say. But as Kelly discovered after spending more than half an hour trying to stop his McAfee anti-virus subscription, the automatic renewals have a downside too.
"The best practice has turned into the one that's best for the company and not for the customer," said Kelly, who blogged about his problems. Kelly is the chief executive officer of Techtel, a US-based market research firm.
Benefits for users
Complaints like Kelly's may start piling up as more PC users become enrolled in automatic update programmes. In early November 2005, Symantec began enrolling US customers into automatic renewal by default, and has expanded the practice into Europe. This year the programme, called Ongoing Protection, has gone worldwide. The company insists it has the interests of its user base at heart.
"The benefit to the customer is lower cost because of the reduction in manpower to update to the latest software version or definition. The other benefit is to have the latest protection engine applied as part of the automatic update process," says Ooi Szu Khiam, senior security consultant at Symantec Singapore.
"There are many advantages for businesses to have their security solution delivered as a service via the Internet," agrees Ashley Wearne, Asia-Pacific vice-president of marketing and integrated solutions for McAfee. "Installation is quick, and protection is always on and up-to-date to continuously guard systems against the newest threats. There's no additional hardware or software to purchase or maintain for centralised management or storage of security reports."
"Once installed, security software delivered as a service is invisible to the end-users in a business," he adds. "They can't alter settings that might later compromise system security."
The vendors have taken steps to prevent their customers from being surprised by automatic renewals. Like Microsoft and McAfee, Symantec's sign-up forms make it clear that online customers are entering an automatic renewal programme, and the vendors send a notification email to customers before they place the new charges on their credit cards.
Giving customers options
While automatic renewals can be convenient, they will make software licence management more complicated for small businesses that are not cutting volume licence deals, said Josh Kaplan, national marketing director for Rescuecom, a US-based computer services company.
Companies will need to keep tabs on subscriptions to make sure they are not charged fees for PCs that are no longer in use, and the automatic renewals will inject some complexity into any efforts to switch security software vendors, he says.
Kaplan says many of his customers have been caught unprepared for the switch to automatic renewals, although this is not necessarily a bad thing.
"I have had customers who tell me that their anti-virus is expired, and who are actually renewed," he said.
"I haven't had any angry customers yet regarding that, but I've had quite a few surprised ones."
Online customers are being registered in these auto-renewal programmes by default, though they won't be able to do this in some countries, where the practice is outlawed. Customers who buy anti-virus products at retail shops, or who have the security software pre-installed on their PCs, may not be entered into auto-renewal.
In Asia, McAfee lets customers have it both ways. "For consumers, we provide the capability to automatically renew their security software subscription annually," says Wearne. "Customers are notified that their software is due for renewal and can modify their subscription details or upgrade their protection package if they wish. They can also purchase software through their favourite retailer."
Total Protection for Small Businesses, the company's offering for the small- and medium-sized enterprises (SMEs), is not automatically renewed and renewals can be processed only through resellers, he says.
At least some security vendors are bucking the software as a service trend. UK-based Sophos has yet to begin directly selling anti-virus software as a service in Asia, according to regional director of sales Jim Dowling, though he notes some Internet providers have repackaged Sophos's anti-virus and anti-spam offerings to sell them to customers on a subscription basis.
Though these services have seen a "big upward swing" in subscribers and it would be "ideal" to enrol existing customers in an automatic update programme, "we are still inclined to respect our customers' options in their anti-virus renewal," he adds.
Selling software as a service is nothing new-the industry has been slowly adopting this model for several years now-but security software is a little different, says John Palfrey, executive director of Harvard's Berkman Center for Internet and Society.
"Companies in this business have a special obligation not to violate the same rules that they are accusing others of violating," he says.
"I don't think any different rules should apply to a large anti-virus provider than should apply to someone offering a free screen saver," he adds.
Techtel's Kelly thinks renewing customers should be given the same kind of price breaks that are commonly used to entice new customers, but despite his experience, he still likes the idea in principle.
"The benefits are good, as long as they maintain good two-way communication and make it easy for you to cut it off."
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