Need a development tool? Borrow it here

Summary:Software makers are learning that development tools could be a perfect market for application service providers.

In a twist on the software-hosting model, companies that make development tools are searching for new profits by offering Web-based tools for rent to software developers.

Software makers Oracle, Borland, IBM, Rational Software and start-ups including CrossGain have begun to offer Web-based software and services for rent that allow programmers to write, build and test their applications--a strategy intended to boost sagging sales in the software development tool market.

The concept of ASPs (application service providers), or companies that rent software over the Web, is nothing new: Established tech companies and start-ups alike, from SAP to Jamcracker, offer everything from business management software to e-mail access and security software via the Net. They also host software and services online, meaning their customers save time and money because they don't have to install and manage the software themselves.

The move to target software programmers could revitalize the development tools market as companies offer new services, such as the ability for software developers to collaborate and communicate via the Web, said analysts.

Analyst Mike Gilpin of Giga Information Group said the Web model works if you have a team of people dispersed throughout the world who have never worked together before, but have to do so quickly. Instead of building the software development infrastructure that could take months to install, companies could simply access the development tools and services they need through the Web.

"Every software project I ever ran, it would take a few weeks, sometimes a month or two, to build the development environment, from software setup to testing," said Gilpin, a former software developer. "If you have teams of people who have to work collaboratively on an urgent, short-term project, the service provider model works pretty well."

For ASPs, rental of development tools offers a fresh, new market to augment existing rental business. In months past, there has been consolidation among ASP players as companies tinker with their business models and pricing plans. In the past few months, for example, companies including Red Gorilla and HotOffice Technologies have gone out of business.

Always a market for tools
Still, market research group AMR Research predicts the ASP market will reach $4.7 billion by 2004, with an annual growth rate of 153 percent.

Though it's too soon to tell whether the ASP model for software developers will thrive, analysts believe there will be a market for Web-based tools.

"It can change the financial structure of a software company," said Forrester Research analyst Simon Yates. "If you're using basic tools and software code management tools, there's no reason to spend hundreds of thousands of dollars to buy them. You can just rent them as needed."

For software companies, development tools are an important part of their product portfolios, even though they aren't big moneymakers. Although tool research, development and marketing can cost a company millions of dollars, the products are often sold at cut-rate prices--or even given away--to woo developers and seed the market for more profitable technologies such as operating systems, database software and high-powered computers from such companies as Microsoft, IBM and Oracle.

Analysts and software makers said the move toward Web-based tools won't completely replace traditional software development, but will augment it. Historically, software developers simply installed development tools on their computers, cranked out software code and communicated via e-mail. Groups of developers within big companies also rely on tools to track the various versions and "builds" of new code.

Web-based tools for rent will "create new customers. It will link other people in the development life cycle--and they will become our customers," said Ted Shelton, Borland's chief strategy officer. "It's not just about the tools, it's about implementing, deploying and managing (software projects)."

Big guns loading up
The Linux and open-source communities, through VA Linux System's free SourceForge and CollabNet's fee-based SourceCast Web sites, have been pioneers in the emerging market. They offer a place that allows developers to manage their projects. The sites can host the software code and keep track of different versions of the software code when changes are made. Developers can also create messaging boards to communicate and discuss the projects.

Borland (inpr), IBM (ibm) and Rational Software executives said they are building their Web-based offerings for software developers. Sun Microsystems and WebGain, a spinoff of Symantec and maker of the popular Visual Cafe for Java development tool, are also considering the ASP model.

Microsoft (msft) executives, meanwhile, have hatched a plan to build a hosted version of the company's Visual Studio family of software development tools in the coming years, according to Chris Atkinson, vice president of Microsoft's Enterprise Solutions Group. A hosted version of Visual Studio would follow the release of its next Visual Studio release, called Visual Studio.Net, later this year.

Most companies are in the rudimentary phase of offering Web-based services. Through companies such as ComponentSource and Flashline.com, developers can download components--prebuilt software code--they can use as part of the applications they are building.

Of the major software companies, Oracle (orcl) is one of the first companies to offer Web-based tools: Its Portal Online Studio and Mobile Online Studio let software developers--in a hosted environment--build portal Web sites and wireless applications. With the portal tool, for example, businesses can build a company portal Web site for their employees--which Oracle will even host.

Borland, formerly known as Inprise, plans to offer businesses the ability to host and manage software projects on the Web, including instant-messaging software that enables developers to communicate and send software code to one another, Shelton said. The company plans to partner with Web hosting companies and begin offering the Web services in May, he said.

IBM is also working on a hosted model, where developers can rent tools, such as an HTML or XML (Extensible Markup Language) text editor, from the Web, executives said.

Although the hosted model may work for some companies, it won't completely change the way software developers write their programs today, Gilpin said. The classic software development way still works if developers at a company have an existing infrastructure that can be used repeatedly, he said.

Mary Jo Foley contributed to this report.

Topics: Software, IBM, Oracle, Software Development

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