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Nowadays, there is a commonly used view among economists and policy makers that competition among platforms and open-source software are intrinsically more desired for social efficiency in comparison to closed-source software. This belief relies on the intuition that free and open access to a platform can only improve social welfare. Although open-source software is getting more and more important, studies have shown that also the monopolistic / closed-source software often desirable is. The price is not the only factor when choosing a particular software. (Gawer, 2002)

At first glance, it seems that open-source software brings more benefits as it is usually cheaper than closed-source software. Moreover, providing an open platform can be profitable as it allows third-party applications to raise the overall value of the platform. Companies with an open platform can profit from selling those rights to develop applications or it could subsidize developers to increase the platform value. However, opening the platform results in a more aggressive pricing strategy for the rivals. Consequently, companies might prefer to keep their platforms closed regardless of the fact that an open platform would be more valuable to consumers. (Economidus, 2006)

Closed-source software is generally built with the end-users in mind which means the technology is often easy to use. Consequently, no special technical knowledge is required. Therefore, closed source software is regularly the preferred choice for firms because of this fact and the fact that their employees do not need extensive training to adapt to the technology. Furthermore, many firms understand that closed-source software is far more secure and reliable compared to open source coding (Gawer, 2002). As closed-source software cannot be altered, it is considerable less vulnerable to cyber attacks for example. Moreover, service and support are great advantages when using closed software. Ongoing support is one of the important selling points for consumers that have little technical skills as it is one of the main reasons why those people choose closed source software over open source software. (Economidus, 2006)

References:

Gawer, A. & M. A. Cusumano, (2002). Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation, Harvard Business School: Boston, MA. Retrieved 23 September 2018

Economidus, N, (2006). Two-Sided Competition of Proprietary vs. Open Source Technology Platforms and the Implications for the Software Industry. Retrieved 23 September 2018, from https://www.researchgate.net/publication/5198078_Two-Sided_Competition_of_Proprietary_vs_Open_Source_Technology_Platforms_and_the_Implications_for_the_Software_Industry

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When someone bought a laptop a couple of years ago, chances are high that this person only had to pay a one-time fee to be able to download a particular software onto his or her laptop – think Adobe Photoshop or Microsoft Office. After this, they could often just simply use the software without having to pay for them again. Nowadays, most Software as a Service (SaaS) providers use a subscription-based model in which the customer pays a small monthly fee. Also, if the customer does not want to use this service anymore, they can simply notify the provider and quit paying the fee after the contract is up. (Quora, 2018)
This makes most things easier for customers, but what happens to the firms? Will they have to change their business model and will this affect their accounting part?

As most channel firms transformed from transactional product sales to the recurring revenue models, they often found it not an easy task to price their services. As subscription-based models are more complex in comparison to a specific margin mark-up on a hardware piece, firms often struggle on how to price their services. Moreover, the new Accounting Standards Codification 606 (ASC 606), which started in December 2017, has a great impact on the way firms recognize revenue. Revenue recognition is a historically inconsistent process across all the different firms and industries. (Caster, 2018) With the ASC 606, subscription-based software solutions, that do also offer other offerings such as security and maintenance, must be broken apart into separate individual transactions. Consequently, the ASC 606 is making revenue recognition calculations more and more complicated which could potentially require new systems to help with forecasting and processing. Although revenue recognition calculations will be more challenging, the ASC 606 has some great advantages as well such as the increased financial statement comparability across different companies and industries. (PWC, 2018)

References:
Caster, S. (2018). What is ASC 606 / IFRS 15 and How it Affects You. Retrieved 13 September 2018, from https://apttus.com/blog/what-is-asc-606-how-does-it-affect-you/

Comptia. (2018). It Industry Outlook 2018. Retrieved 13 September 2018, from https://www.comptia.org/resources/it-industry-trends-analysis

Pwc. (2018). Revenue Recognition. Retrieved 13 September 2018, from https://www.pwc.com/us/en/cfodirect/issues/revenue-recognition.html

Quora. (2018). The Pros And Cons Of Selling Your Software As A Subscription Service. Retrieved 13 September 2018, from https://www.forbes.com/sites/quora/2018/07/25/the-pros-and-cons-of-selling-your-software-as-a-subscription-service/#18fd4d7475fc

Closed-source software and its benefits

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Revenue recognition challenges for subscription-based models

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