Hey, here's a news flash from the everything old is newagain department. People are talking about hosted applications. Remember 3 or 4years ago when application service providers were going to knock every softwarecompany out of business. Well, the truth is it's the ASPs who pretty much bitthe dust.
So why are we talking about hosted applications again? Well,because it's with a twist. The vendors control the process this time. So let'stake a look at the difference between how we used to talk about hosted apps andhow they're actually being done today. Let's draw a quick chart. We're justgoing to put it on one side, the old model and the new model and then we'lltalk a little bit about the challenges the new model still faces. But in theold days the ASP was going to be the business partner, the application serviceprovider, they were going to run your apps for you. All you were going to needwas a browser. Well, it didn't turn out quite that way, did it? Now when wetalk about hosted applications, we're talking about the vendors, the softwaremakers themselves, and that's true whether you're talking on the commercial orthe, you know, the consumer side.
Say on the consumer side, look at a company like Intuit,which has the online version of Turbo Tax. That's a good example of a consumer-hostedapplication and on the corporate side Salesforce.com, which has been a pioneerin hosted sales management and contact management services. So that's onedifference, vendor-based, ASP-based. Here's another, the ASPs had big plans.They were going to do it all. They were going to host your financial servicessoftware. They were going to host your CRM and ERP implementations. They weregoing to do your e-mail. They were going to do your accounting. You know, theywere going to be a one-stop shop for all your hosted application needs. Here,most of the successful hosted applications are centered around one mainapplication. Companies have tried to narrow the focus and do one thing onlineextremely well and concentrate on those areas where it makes sense to try ahosted application. So that's kind of the differences between the twoapproaches.
There is one other thing though they still have to figureout and that kind of bridges the gap between the old and new models. That's,how are you going to pay for the thing? You wouldn't think that will be anissue but there's a lot of choices. Consider, do you want to charge on atransaction basis? That's what Turbo Tax does. Pay a fee every year so you cando your taxes online, or pay in a per seat basis, that's how most of thecommercial hosting is done. So it's like again Salesforce.com or my ASP startedby saying, "Hey, you need 10 sales reps with access to our sales software.You need 100, here's what the per seat fee is." So those are two differentmodels.
Another one is based on usage, and that could be anythingfrom how much processing time it takes to how much storage it takes,combinations of the above. So you can see they're still trying to figure out ifthere's one predominant way to charge for hosted applications, but byconcentrating on a single application and having the vendor be in control, youcan see that the new way of doing hosted applications seems to be moresustainable than this grandiose vision that the old application serviceproviders were pedaling.
