Sunsetting: Business Definition and Meaning

Patrick Ward Patrick Ward Follow Jul 19, 2024 · 5 mins read
Sunsetting: Business Definition and Meaning

Business Definition of “Sunsetting”

Sunsetting is a term used in professional fields to indicate the planned cancellation or phasing out of a product, service, or policy. A common expression in business, technology, real estate, law and politics, sunsetting is the planned termination of an initiative, often to make way for a new alternative.

Sunsetting is a popular expression in several professions, including business, software, real estate and politics. Essentially, sunsetting would be a term found in any profession that manages contracts, goods, or services in which a deliberate strategy for termination and redevelopment is beneficial for consumer engagement and revenue generation.

Most business professionals, regardless of industry, should be familiar with the term and its definition.

Understanding Sunsetting

Sunsetting, in most professional contexts, refers to the deliberate termination or phasing out of products or services. Sunsetting is typically incorporated into the business plan, or product life cycle, prior to product launch, though the exact time of sunsetting may be dependent upon a number of considerations.

The financial performance of a product does influence the timeline on which it is slated for sunsetting, and products that are no longer profitable, or in alignment with the company’s brand, are usually phased out sooner. However, a successful product may still face sunsetting. In order to maintain the attention of the public by continually providing new technology, projects may be scheduled for sunset simply to make room for another option for purchase. Often technology products will not be supported with updates or new software after sunset in order promote ongoing product acquisition by consumers.

While the term sunsetting can be found in other industries, such a real estate and politics, the definition is typically the same – building an expiration into a contract or policy to promote action, or to remove a consideration after a certain duration of time.

What does sunsetting mean in software?

In software, sunsetting means the planned cancellation or phasing out of a product or service. After sunsetting, these projects may no longer be supported through updates, rendering them completely obsolete.

It’s important to note that sunsetting can refer to the termination of a product, application, or service line, or just one of its components. For example, while some companies have sunset specific phone models to make way for new versions, Blackberry chose to sunset its entire hardware creation division, allowing the brand to focus all efforts on software.

What are some synonyms for sunsetting?

Synonymous terms and expressions for sunsetting include: cancel, discontinue, phase out, terminate, expire or conclude.

What is a sunset clause?

A sunset clause is a legal or contractual provision that outlines a finite expiration for the document and the policies within. For instance, sunset clauses can be incorporated into sales contracts indicating that, should both parties fail to agree on a price by a specific date, the contract will become void.

Additionally, some legislation, such as the U.S. Sedition Act of 1798, and portions of the USA Patriot Act, had sunset causes included, which outlined end-dates for those provisions, unless they were specifically renewed.

What does it mean to sunset a project?

To sunset a project is to conclude or terminate that initiative. Typically, however, the term sunsetting suggests a pre-planned project completion, as opposed to a project failure. For instance, a nonprofit may sunset a direct-mail fundraising program, in favor of a more efficient email-based campaign, regardless of how much the direct mail program generated. However, a program that unexpectedly goes out of business due to financial failure, would not usually be referred to as a sunset.

Origin of the term “Sunsetting”

As a concept, sunsetting dates to the politics of ancient Rome, which utilized legislative assemblies for lawmaking. Some of the laws produced included time limits to ensure that they did not continue perpetually without review. This concept of building a cycle of termination and renewal into laws has continued into modern American politics, with “sunsetting” emerging as a specific term in the 1970s.

Sunsetting, as a phrase and practice, has now been incorporated into the lifecycle planning and business frameworks of many companies, and has found increasing popularity in the software and technology industries.

In America, the first use of political sunset provisions appeared in the Sedition Act of 1798, which limited certain forms of free speech, but was written to expire at the end of President John Adams’ term. That said, the actual expression “sunset provision” does not appear prominently in American politics until the 1970s – after which the term began to make its way into the business, law and real-estate professions.

The applications of “sunsetting” are a little different according to the industry, but the definition remains the same. For instance, in real estate, sunsetting can be commonly found in Contracts of Sale and other documents that have built in expirations, after which the terms must be renegotiated. Furthermore, while a business contract may have a sunset provision, sunsetting can also be used in business to describe the deliberate phasing out of a product to allow for a newer model, such as the introduction of new car models every year.

Sunsetting has become a common practice in technology, where the pressure to create new content is heightened, and developers and entrepreneurs no longer wait for a product to wane in popularity before producing a new version. Additionally, in technology and Software as a Service businesses, sunsetting can take on an added aspect, through the withdrawal of support from older models. This is to say that, unlike automobiles which can be driven for years after manufacturing has ceased, technology products that have experienced sunset may no longer be supported with updates, adding to the finality of the decision for the consumer.

Patrick Ward
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Hi, I'm Patrick. I made this site to share my expertise on team augmentation, nearshore development, and remote work.