Rent-a-server: the latest trend in business software

Application service providers hope you'll turn to the Web for more than surfing

The saying “the Internet changes everything” may not be too far a stretch. Paradigm shifts have become commonplace as old industries are reengineered and new ones emerge. Of late, they’ve been coming even faster as businesses and consumers continue to harness the potential of a medium still in its infancy. Although it was immediately apparent to many observers that the Internet could be used to deliver software cheaply, the nascent market was fairly confined to consumer downloads of browsers and other relatively small files.

As the transmission technology matured, many software companies began delivering the same applications that could be purchased in retail stores via their Websites-thus cutting out the middleman. Individual users who had enough faith in the Internet-and wanted the discount software makers often provided-were the early adopters. Small businesses were slower to catch on to this model. But a recent industry push toward hosted applications may well open the eyes of business owners everywhere.

Within the past year application service providers (ASPs) have begun to multiply faster than rabbits-and with good cause. IT research firm International Data Corp., based in Framingham, Massachusetts, expects the market for hosted applications to reach $6.1 billion in 2001. More than just providing downloadable applications, ASPs allow businesses to outsource a portion of their information technology infrastructure by using applications that are maintained on the ASP’s servers rather than in-house. The applications are then accessed through a browser on each user’s desktop. Small businesses especially could benefit from the growth of ASPs because they lower the cost and responsibility of maintaining software.

“Many small businesses don’t have an established IT department,” says Dave Castellani, CEO of MI8, a New York City-based ASP. “We can offer big business tools at a fraction of the cost.” Launched just last year, MI8 (www.MI8.com) supplies its clients with groupware applications such as Microsoft Outlook, Lotus Notes, ELAN Goldmine and Novell Groupwise. Castellani estimates it would cost over $75,000 to install and maintain the hardware and software required to get an office of 40 users up and running in the first year, and $50,000 in the second. MI8 can provide the same service for an annual fee of $10,500, and can have a company up and running in 24 hours.

Hosted applications aren’t new. Essentially, they’re an Internet twist to the centralized computing strategy that was abandoned, by and large, when powerful desktop computers became available. But sometimes in computing, just as in fashion, everything old becomes new again. This time around, ASPs are touting the supposed benefits of hosted applications. These are:

  • Cheaper hardware. Companies need only low-end PCs or dumb terminals that can run a browser.
  • Cheaper administration. It’s easier to upgrade a centralized application than going to each desktop.
  • Universal access. Because they’re Web-based, employees can access applications from anywhere as long as they have Internet access and a browser.

For all their promised benefits, hosted applications have their drawbacks, not the least of which is an unproven track record, says Steve Robins, a senior analyst with Boston-based IT research firm

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