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The End of Software as We Know It

Posted by inet - 2005-12-22

Computing is a dynamic field in which standards and practices rarely stay the same for long. Nowhere is this truism more evident today than in software installations.
Once upon a time, if you wanted to install an application, one or two floppy disks did the trick. Now, it is rare to find fully featured business applications that can fit on fewer than one or two CD-ROMs. With the arrival of the Internet, it wasn't long before you could purchase new programs via download, never having to touch anything but the mouse.

Today, a quiet revolution is eliminating the traditional methods of software delivery in the workplace, slowly but surely. Instead of purchasing and installing software applications on individual workstations or on corporate servers, more and more CIOs are buying into the software-as-service model.

Microsoft recently introduced its plan to go "live" with its Windows OS and Office applications. Web-delivered business programs from companies like Salesforce.com, which has reported increasing demand for its hosted applications, are gaining in popularity. Are these shifts in delivery standards a sign that software as we know it is dead?

Outlook Encouraging

"Software services, on-demand, have been growing in importance for the last five years," said Yankee Group analyst Sheryl Kingston. "Products like Salesforce.com as a CRM application paved the way for this category of service."

Kingston sees signs that delivered-software services will continue to grow. "Right now [the hosted-service model] represents less than a 5 percent foothold," she said. "Eventually, it will grow stronger as an alternative to boxed software and could replace sales-force automation applications."

Forrester Research analyst Elizabeth Herbert concurs, seeing a future in which most software manufacturers let customers choose whether to deploy an in-house application or simply rent it as on-demand software. Some companies already are offering such choices.

"Microsoft's recent announcement about its Live offering is further evidence that this is what the market is demanding," she said.

That the software landscape is changing is irrefutable, but reports of its eminent demise have been greatly exaggerated, according to Jonathan Eunice, principal I.T. adviser for Illuminata. "Software as we know it is not dead," he said. "It is, however, increasingly in competition with software-based services delivered across the network."

A key factor driving this new model is that the technology to deliver hosted services has matured greatly in the last decade. "High-speed or broadband networks are now common," Eunice said. "Server operating systems are highly scalable and ready to support thousands or tens of thousands of clients."

Shifting Focus

Enterprise I.T. workers won't be the only ones interested in software as a service, Eunice predicted. In general, customers who are happy with the services they get online now (whether from Google, Mapquest, or other providers) are ready to accept more network-delivered services, he said.

Those people might be ready to leave software installation behind and make the shift to a remote service like Microsoft Live. But the transition to the service concept augers a steep learning curve for some and has the potential to introduce new aggravations.

"Many companies will not feel safe from privacy, service availability, or regulatory-compliance perspectives having all of their activities hosted outside their organizations' firewalls," Eunice said. "Even so, they might want the benefits of not having to install software on every system they have."

In such cases, companies can take an application and host it on their own servers, he suggested, a measure that offers many of the same advantages as buying an external service but without the risks noted above.

This approach, Eunice said, will be an effective transitory step for widely used software like e-mail, office applications, or human-resources programs. It will work just as well with something very specific, he said, like a manufacturer's ordering screen.

The Cost Factor

According to Eunice, software as a network service is a powerful concept because, at the end of the day, people do not want software itself. They want the results of the software, he said. "That said, software as a service is an evolution, not a replacement for software as we know it," Eunice said.

Yankee Group's Kingston said that the promise of more and better functions will make the service model attractive to customers. Still, cost always will remain an issue, she said. Switching from boxed to hosted software does not necessarily produce savings.

"The reality is that, when a company decides to use delivered services, it winds up paying for it forever," said Kingston. Some companies might never even reach the break-even point after they invest in hosted services, she said. "The cost analysis of using delivered software rather than packaged products is always going to be complicated."

For small businesses, especially, the benefits of a hosted service might not be worth the expense. CIOs should set clear goals and carefully crunch the numbers before making a decision on which approach to adopt, Kingston said.

"Despite these potential cost setbacks, delivered software services is a very positive application paradigm for all companies to at least consider," she said. "CIOs simply have to understand that this approach may not be a good financial fit for all enterprises."

A Suitable Host

For the Clinical Pathology Lab at the University of California at the Irvine Medical Center, the decision to switch to software as a service pumped new blood into an anemic operation. In considering new software, the administrators at the lab were faced with a daunting task. The laboratory handles over two million tests a year and must comply with several provisions of the Health Insurance Portability and Accountability Act.

Earlier this year, the clinical staff went to the university's I.T. department and requested an online system to help track all lab tests and associated documents. At first, the I.T. team decided to hire a large outside software service at a potential cost of hundreds of thousands of dollars. After some additional research, the I.T. staff located a smaller company that was able to deploy the services in less than two months and at a fraction of the cost the first company would have charged.

In weighing such a decision to adopt hosted-software services, CIOs must consider the effects on desktop productivity. Kyle McNabb, senior analyst for Forrester Research, said there are three main options for companies considering software as a service.

One option is to sign up for subscription-based applications. The second option is to use a blend of on-demand services, such as IBM's Workplace Managed Client, for completing a specific task within a limited time. The third option is to receive updates and new products automatically to eliminate the need to keep up with the massive release cycles the software industry goes through now.

The software-as-service model does not mean the death of desktop productivity software, said McNabb. Instead, it is leading to an evolution of the market. "In desktop productivity, software as a service is emerging as an alternative to full, thick-client desktop applications," he said.

The hosted model might make sense in organizations in which every employee does not need to use every application in every desktop software suite. Some workers need access to information, but they do not need to produce it. Some people are occasional users of word processors, spreadsheets, and other applications, but do not need a full package to support their casual needs.

Still, there is a large segment of workers who need more. Marketers, financial analysts, and engineers, for example, often work on complex projects that require full-service applications.

Age of Flexibility

"We're rapidly approaching a time in which I.T. organizations can be more flexible in what desktop productivity tools they can provide to the end user," McNabb said. According to him, many company executives have asked whether or not the Salesforce.com model could work for the desktop environment. He is not sure it would be embraced there.

"I've spoken to many organizations that view Salesforce.com as providing a solid utility to non-mission-critical data and processes," he said. "These same organizations look at their documents, spreadsheets, and other similar information assets as corporate intellectual property. I'm not sure they want to, or can, trust their corporate intellectual property to be managed by a third party."

McNabb said that, because of this concern, software as a service more likely will emerge as an option for companies that wish to pick and choose services rather than commit to a full subscription-type model similar to Salesforce.com.

Some industry watchers say that continued interest in the hosted-software model will drive down the costs of subscribing. And even when those costs remain higher than an outright purchase, the pain of a stalled application might help CIOs make the switch.

Other software experts see consumer interest adding to the tipping point. In that arena, success might be found by selling new hosted features or supplements to existing boxed applications. The legacy user base of established boxed-software applications is simply too deep, the argument goes, for a massive change in attitudes toward software delivery.

But recent advances made by companies such as Google and Yahoo have demonstrated the kind of hosted services that consumers readily will accept. It's a concept with which some enterprise workers already are well acquainted, and one that might gain even more adherents as companies take a closer look.

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