The challenge of software on demand

Having changed the way so many other things are sold, it’s no surprise the Internet has had a dramatic effect on software distribution. It has done that in more than one way. A lot of software can now be downloaded directly from a supplier’s Web site instead of being bought off the shelf. And some customers aren’t even downloading the software to their own computers – they just connect to the software developer’s servers and let them do the work.

The best-known example of this software-as-a-service model today is, which provides sales-force automation and related functions. has several competitors in that space. Customer relationship management for small to medium-sized businesses seems to be one of the hottest areas for software-as-a-service (or on-demand software, as some call it).

But it is cropping up in other areas. Microsoft recently announced Windows Live and Office Live, which encompass a number of functions, such as collaboration tools, aimed mainly at small offices. The Aberdeen Group, a research firm in Boston, recently released research saying many businesses are looking at on-demand applications to manage parts of their supply chains.

Software-as-a-service has several advantages for customers. The software provider takes responsibility for running the software. You pay a modest ongoing fee rather than shelling out to buy the system up front. And because you connect to the software via the Internet, it’s accessible from anywhere. That’s one reason why software-as-a-service is big in the sales force automation area — many of those users are mobile.

These advantages can be overstated. gained some unwanted attention early this year because of a series of service interruptions.

The company had to put up a special Web site to address its customers’ concerns.

And Jim Shepherd, senior vice-president of Boston’s AMR Research, Inc., points out that a business concerned about up-front cost can obtain financing for software purchases, and outsourcing is another way for those without internal IT expertise to avoid the job of running the software themselves.

There’s also a question about relying on software that isn’t sitting on your own computers to run your business.

What if the supplier goes out of business, or you are unhappy with the service you’re getting? With conventional software, the support may be gone, but the software and data at least is still there on your system. Not so with software as a service.

However, the on-demand software companies say they can provide customers with regular copies of their data.

The model has legs
The software-as-a-service idea clearly has legs, at least for some types of software. And that raises a question for the channel. If more and more customers turn to this model, what does that do to the business of selling software?

It’s a legitimate worry. Not only are those customers not coming to you for the software, but they probably won’t be looking for support for that software either, since the software provider is responsible for running it.

There’s no simple prescription. Like anyone — and there are many — whose business is affected by the Internet’s continued evolution, resellers need to look at what they can offer that their customers can’t get more quickly and easily online. Not always easy, I know, but that’s life in the information age.

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Jim Love, Chief Content Officer, IT World Canada

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