The return of hosted apps

Hey, here's a news flash from the everything old is new again department. People are talking about hosted applications. Remember 3 or 4 years ago when application service providers were going to knock every software company out of business. Well, the truth is it's the ASPs who pretty much bit the 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's take a look at the difference between how we used to talk about hosted apps and how they're actually being done today. Let's draw a quick chart. We're just going to put it on one side, the old model and the new model and then we'll talk a little bit about the challenges the new model still faces. But in the old days the ASP was going to be the business partner, the application service provider, they were going to run your apps for you. All you were going to need was a browser. Well, it didn't turn out quite that way, did it? Now when we talk about hosted applications, we're talking about the vendors, the software makers themselves, and that's true whether you're talking on the commercial or the, 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-hosted application and on the corporate side Salesforce.com, which has been a pioneer in hosted sales management and contact management services. So that's one difference, 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 services software. They were going to host your CRM and ERP implementations. They were going to do your e-mail. They were going to do your accounting. You know, they were going to be a one-stop shop for all your hosted application needs. Here, most of the successful hosted applications are centered around one main application. Companies have tried to narrow the focus and do one thing online extremely well and concentrate on those areas where it makes sense to try a hosted application. So that's kind of the differences between the two approaches.

There is one other thing though they still have to figure out 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 an issue but there's a lot of choices. Consider, do you want to charge on a transaction basis? That's what Turbo Tax does. Pay a fee every year so you can do your taxes online, or pay in a per seat basis, that's how most of the commercial hosting is done. So it's like again Salesforce.com or my ASP started by 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 different models.

Another one is based on usage, and that could be anything from 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 if there's one predominant way to charge for hosted applications, but by concentrating on a single application and having the vendor be in control, you can see that the new way of doing hosted applications seems to be more sustainable than this grandiose vision that the old application service providers were pedaling.