Water, Telephone, Electricity, and now Software. Get ready for the next utility! Software is on its way to becoming a service, on a pay-per-use basis. What is making this possible is the Internet and availability of reliable bandwidth. The difference between the Local Area Network (LAN) and Wide Area Network (WAN) is disappearing, thus making it possible for storage and processing to be moved away from where the user is, with almost no deterioration in speed and quality of access.
This should be good news for the software companies. In some ways, the Napsterisation of software has been taking place for many years. In countries like India and China, software piracy has been rampant, limiting the incentive for local software development. Partly to blame are also the software companies whose “one software, one price” philosophy makes it prohibitively expensive for most individuals and companies, especially in the emerging markets. This model is about to change to one based on transactions or a monthly/annual subscription fee.
Making software available as a service is the business model of Application Service Providers (ASPs), who have not done as well in their first avatars. This is because the focus has been on taking existing packages and making them available on the Internet.
Not only are these packages not made for the Internet, but their costing also is being done in a manner which does not make it as attractive for the end users. The next generation of ASPs are the ones who are re-writing software for the Internet and building a model wherein lots of businesses would pay a few dollars a month for it use. Examples include NetLedger and Intacct in Accounting, SalesForce.com for Sales Force Automation and Customer Relationship Management, and EmployEase for HR.
The problem is that the software being offered is still in silos, just as business is trying to integrate the various operations and information flows. What is needed is the ability to provide an integrated view of the enterprise such that data needs to be entered only once. This is what Oracle is trying to do with its eBusiness suite. While this integrated software utility model will be a tough sell to some of the larger companies who already have some applications already installed, it is ideal for some of the smaller and medium-sized enterprises who have little or no legacy, and are more willing to adapt their processes to the software.