What's not discussed is "the increased savings from moving to an open source knockoff of 37 signals' offerings", given that you're not just paying once, but every month.
While true, I imagine a lot of small businesses who use 37signals won't have a dedicated IT staff to manage and maintain an instance of XYZ project manager. Having 37signals handle all the 'techy' stuff and having them as support must be cheaper than hiring someone to maintain it.
I guess 'open source' narrows it down too much, but a bunch of guys who go around trying to 'do less' ( http://gettingreal.37signals.com/ch02_Build_Less.php ) can't be that hard to undercut as far as their products are concerned (they would be very difficult to beat, though, in marketing terms). You could offer a product that people only have to buy once, for instance, instead of slowly bleeding them month after month.
From the business perspective, what's the advantage? If you sell a product once, I feel like it becomes more difficult to have people pay for an upgrade. If you spend a lot of time developing updates and improvements upon your product, I feel like you'll find fewer and fewer people willing to pay for them because whatever they have "works fine".
From the customer perspective paying month creates an ongoing incentive for the developer to continue to maintain and enhance the offering. If the application is something that you would foresee using every month, or at least most months, then paying for it monthly aligns incentives.
From the seller perspective it is normally easier to get folks to pay a smaller amount for one month's use than an annual or perpetual license fee. You can always offer annual and multi-year licenses with a discount structure in addition.
It's completely in the business' interest to keep going back for more money every month. However, perhaps with the economy headed south, people will look at that flow of money and think twice about it.
Actually, hard times make many people discount the future more. Why spend a lot of money up front on a solution that will sustain you for four years when the odds that your company won't last one year have just gone up?
In extreme cases, businesses with cash flow problems are just like poor people, who are forced to patronize ripoffs like check-cashing places, payday loan sharks, and Rent-A-Centers because they can't afford the minimum balance or down payment on a better solution. They live day-to-day. So do businesses in trouble.
