The availability of cloud-based solutions has brought about a new debate that discusses the merits (and pitfalls) of one-time versus recurring payments. Both sides of the argument have valid points, and we've listed them down below, involving the points of view from both the suppliers or vendors of technology, as well as the front-end users or consumers.
The biggest benefit of one-time payments to suppliers is clear: the lump sum that you receive from a customer. The common reasoning is that it's easier to plan your budget if you already know how much cash is in the bank. However, this reasoning overlooks the fact that your expenses—bills, salaries, overheads—are recurring. This shouldn't pose a problem as long as you still have enough money from past payments, but if you don't have a steady flow of new customers, you will slowly run out of cash to spend. It may also be harder to acquire new customers, because not many are willing to take such a big leap without being able to test the product at hand.
On the user's end, the biggest selling point of this kind of payment is that they are making a one-time investment that no one can take away from them. It's also convenient to be able to pay for a product once without having to worry about it ever again. On the flip side, this is will not even be an option for you if you don't have the amount required at the time. The price you're charged will not even include the cost of annual support, updates, and upgrades—this can amount to 18-22% of the total cost of acquisition. After spending all that money, most users' biggest fear is that the product will not be up to par with their standards, and their dissatisfaction will mean that they essentially wasted their money.
Suppliers may benefit from this mode of payment precisely because their income will be recurring. This steady cash flow will help cover their regular expenses, and will enable them to project their income from month to month. This setup is also optimized for catching mistakes and making market discoveries, because they are continuously evolving with their consumers. However, this model also leads to a higher churn rate, because only dedicated fans and evangelists will constantly want to renew their subscriptions. Thus, there is a need for better customer service to keep clients happy and engaged.
On the other hand, recurring payments are more affordable for the front-end user, and enable them to drop out any time they want to, whether they are unsatisfied with the product or unable to pay. Users will also be willing and able to try a product out because this model requires less commitment upfront. However, some may be put off by constantly having to renew their subscriptions—once their payments stop, they lose access to the product. This is inconvenient if they unintentionally miss a payment, perhaps due to negligence. This is abated by payment setups that automatically renew after a given period, but this may also cost the user additional money if they intend to unsubscribe but forget to cancel their payment.
While both modes of payment have their own benefits, recurring payments have a higher edge here for both the suppliers and users. At the end of the day, it all boils down to whether the vendors are putting a lot of work into creating and maintaining a product that people want to invest in, and whether the consumers see the value of the software or technology that is set in front of them.