The life expectancy of software, especially purchased software, has become shorter and shorter over the years. While in the past an organization could be on the cutting edge of technology for five or six years with the software it had, now some applications become obsolete within two or three years. If you personally want to use the most current application, such as word processors and spreadsheets, you must pay several tens or hundreds of dollars to upgrade your version every two or three years. Now imagine how much money organizations have to pay for the same privilege for hundreds of thousands of employees. Worse, unlike households and small firms, many organizations spend millions of dollars on enterprise-wide applications, such as supply-chain management, ERP, and Web-based transaction systems only to find that two or three years later their version is old and lags behind the newer versions that their competitors use. Also, for small companies, the cost of even a single module of an enterprise-wide system may be too high for purchasing. They prefer a monthly payment to a single, but large allocation of capital for the software.
The answer to these challenges may be a relatively new approach to acquiring applications renting. There are two approaches to renting: in one, the organization pays for the use of an application over a limited period of time at its site; in the other, the organization pays to use the application through the web.
Many IS executives would rather rent software for a limited period of time and pay less than own it for a much higher cost. To satisfy this need, many software vendors now offer rental programs. For example, many organizations rent antivirus software rather than purchase it. Network Associates, Inc., the company that owns the popular McAfee antivirus software offers rental contracts for limited periods, as short as one year. The company realized that...