I recently read an article by Mary Jo Foley (the ZDNet Microsoft reporter) about Microsoft testing a monthly subscription model for Office. As you might expect, their readers were not too keen on the idea of paying $15/month to use Office. I'm pretty sure if I had to pay for using Office (my company provides my software currently) that I would be looking for cheaper alternatives, but I can't dismiss paying monthly or annual fees for software altogether.
I spent some time working for Sun Microsystems who, at the time (and may still be doing it), charged companies an annual fee based on the number of employees they had when they filed with the feds. They charged what seemed to be very little. I think they charged something like $50/employee/year for unlimited use of any one of their server products or $150/employee/year for unlimited use of their entire server product suite (like 5 or 6 products in the suite). This included all technical support needed by the company. For example, a 100 employee company would have to pay $5000/year to use their messaging server software that includes online e-mail, contact management and calendaring. Now I'm not saying that Sun is the right software or that the price was right, but the model seems attractive to me as a business owner. Paying a low, yearly fee for all use of the software and support makes things very predictable and the price scales up with the size of the company. I forgot to mention that as part of the package Sun would deliver quarterly updates and upgrades to these customers.
So if my company could license MS Office for $100/year/employee and this included phone support and got my company out of the MS upgrade cycle (meaning my company could always be on the latest Office using Microsoft Update and without having to do a huge upgrade migration every couple years) I would probably do it. Maybe the $100 is still too high, but at some price ($10?) it becomes attractive.
I still question the downstream affects that model would have on the software company. Are the benefits of having a recurring revenue stream strong enough to cover the lower prices? Does the motivation for the product team change when they don't have big upgrades to sell? Do costs go down if they can count on every customer being on the latest version of the software? How do they go about making a huge shift in the way the product works like they did with Office 2007?