For Rent
This story appears in the June 1999 issue of Entrepreneur. Subscribe »
What's one of the bigger buzzes in software circles these days? Renting high-end programs as subscription services delivered over the Web. Now you don't have to buy and install a big software package on your computers--you can simply rent the use of it for a monthly fee. This application-services model is expected to sweep the software industry over the next few years; established software firms are already scrambling to turn their products into services.
The major beneficiaries will be small and midsized companies that haven't previously been able to afford many high-end software products. With a Web browser on virtu-ally every desktop com-puter and a fast and fairly reliable Internet on hand, receiving applications as services looks irresistible. Depending on its size, a company might be able to pay as little as $1,000 a month to use, say, a $500,000 pay-roll application--or perhaps pay just a few cents for each transaction or inquiry the software processes.
These new services will run the gamut in terms of functions they deliver. Some companies are focusing on a class of applications called enterprise resource planning (ERP) applications, which combine into one system everything from overseeing human resources and proc-essing orders to performing financial accounting functions and managing manufacturing resources and inventories. Until now, such comprehensive packages have been out of the budgetary range of smaller companies.
Other providers are focusing on narrower slices of the pie. A big area is so-called customer relationship management (CRM) applications, a catch-all term that encompasses sales force automation, marketing and customer service. Here, too, large corporations have been the primary targets. But with more and more marketing being done on the Web, providing these solutions as rentable services makes sense.
A good example is Responsys.com (http://www.responsys.com), based in Santa Clara, California, which offers services to help manage online direct-marketing campaigns. Cus-tomers use the services to create direct marketing messages, e-mail them to selected prospects, analyze replies, refine the messages, and repeat the process. It's a blend of several marketing and technology services that have traditionally been handled separately. Charges start at $2,000 per month for this service in comparison to the $300,000--plus the price of upgrades--you'd have to spend for soft-ware to do the same things.
The list of such providers goes on. Agillion Inc. (http://www.agillion.com) in Austin, Texas, is working with several as-yet-unidentified software manufacturers to launch a set of sales- and marketing-related Web services just for small and midsized businesses. A Malaysian company called BizTone.com (http://www.biztone.com) has developed a full ERP package to help companies manage employees on a global level. And Redwood Shores, California-based Oracle Corp. has put up $100 million to help fund companies building Web-delivered applications based on its Oracle database software. Driven by the Internet's incredible economics, applications services promise to emerge fast and furiously.
John Verity reported and edited for 10 years at Electronic News, Datamation and Business Week. Since 1997, he has been freelancing from his Brooklyn, New York, home.
Happy Trails
Renting software over the Web isn't just for companies. Individuals who are on the road a lot and switch between different computers can now rent a so-called virtual desktop from Magically Inc. Its MagicalDesk service lets you store and view your important data files (any of 250 types for PC, Mac and Unix programs), calendar, schedule and to-do list, as well as send and receive e-mail--all using nothing more than your Web browser (as long as it supports JavaScript and frames) on any computer.
Simply dial into the Web, and you're at work. It also syncs up information with your desktop, laptop or PalmPilot, and allows others with the right password to view your files. An introductory no-frills service is available at no charge; the full service costs $5 per month with 20MB storage or $10 for 50MB. For more information, visit http://www.magicaldesk.com
