SMB Focus: Today's breed of hosted applications can
offer smaller companies fixed costs, reduced complexity and
guaranteed compliance. Arif Mohamed reports
For many organisations, there may be business and technology
projects that would be better served if somebody outside the
company ran them.
Such activities may include individual operations such as an
online payment mechanism or a business intelligence project.
At the other end of the scale, an organisation may decide to
have a core business application, such as Oracle or SAP, hosted
with a third-party service provider, so that it can cut its IT
costs and transfer the burden of IT management.
Application hosting has several names - including applications
on demand and software as a service - but it essentially means that
a professional service provider is in charge of the running and
maintenance of the user's applications. The provider generally
makes them available to the user via an internet connection and web
browser.
Strictly speaking, the concept of having applications available
on demand over the internet is not new. However, the new generation
of hosted application services is far more sophisticated than
previous incarnations.
David Bradshaw, principal software analyst at Ovum, says
software as a service for today's hosted enterprise applications
differs from traditional software services. Traditional hosted
applications are essentially standard enterprise applications that
have been implemented and customised in the usual way, then hosted
remotely, rather than housed in a company's own datacentre.
"The financial arrangements vary a lot, and are open to
negotiation. So they are individualised but still rather
expensive," he says.
"In contrast, software as a service provides an intrinsically
hosted solution that has been optimised for economies of scope and
scale - economies that are passed on to the customer.
"Unlike traditional hosting, the code cannot be customised. This
is a good thing - most application suppliers are trying to stop
code customisation anyway, as it creates massive support and
upgrade problems for them. Instead, the software is highly
configurable," says Bradshaw.
"Some people say software as a service is not scalable, however,
Salesforce.com has half a million users. There is no reason why
other hosted application players should not have the same, in time.
How many enterprise systems have anything like that many
users?"
Many IT managers will have doubts about the viability of hosted
applications, but Bradshaw says that on the whole, a lot of the
supposed drawbacks are not relevant, and are "invented by rival
suppliers as fear, uncertainty, doubt to try and hold onto their
market position against the threat from software as a service until
they get their own act together."
For hosted applications, the data is normally located in the
main datacentre of the supplier, which tends to be a large
web-hosting environment, and this will contain a secure, high
performance IT system, which will have to satisfy the most
demanding users.
Steve Garnett is general manager EMEA at Salesforce.com, one of
the best known hosted application service providers for customer
relationship management (CRM) software.
He says the firm offers users several hosted services for key
business applications, which comprise CRM, salesforce automation,
marketing automation and customer service.
Through its App Exchange platform, users can create an
additional range of applications that can be available on demand,
and there are now more than 300 of these, covering project
management and recruitment, and industry-specific financial
services.
"On-demand is the future. We are seeing customers with two or
three users using on-demand applications, and at the high end some
of the largest organisations like Merrill Lynch, ABN Amro, Cisco
and Nortel. You do not have to own your own software, or manage it
and run it," says Garnett.
In the past, companies have had to build their IT systems
because they had no decent alternative. But now, with the web, they
are able to pay for computing as they would their utilities or
sanitation, says Garnett. "If the internet was not here we could
not operate."
From the user's perspective, they do not need a great deal of
technical expertise to use hosted application services, according
to Teresa Jones, senior research analyst at Butler Group.
"Today's hosted applications tend to be accessed using a
browser, such as Internet Explorer, though some service providers
offer alternatives. As such, they may differ from older hosted
e-business solutions that may well have used a 'thick' client
application on the user's desktop, even though the application
server and database were hosted by the service provider," she
says.
"Although advances have been made, notably with what are called
rich internet applications using Ajax and similar technology, the
user experience can still be a little slower than with a desktop
application. The benefits are that it can probably be accessed
wherever the user is."
Jones adds that the benefits of a hosted application include
that it is easy to set up, more intuitive to learn than a
thick-client system, and offers a pay-per-user-per-month fee,
rather than up-front licence and services fees. The user can start
small and scale up in a cost-effective manner with most hosted
application service providers.
However, Jones says that the main issue with hosted applications
is network bandwidth. "You need to have good bandwidth to access
these services. Dial-up is probably painful, so the salesperson
accessing it over dial-up from a hotel room, or wireless from the
road, could be unhappy.
"Even though we now have good broadband coverage in the UK there
are still significant areas that do not have it, and there is no
guarantee of quality of service from your ISP unless you pay extra
for it - this might well be worth doing."
The main consideration for IT managers embarking on a software
as a service strategy is to carry out their due diligence, with a
side-by-side comparison of what processes they would be willing to
relinquish control of to a third party, says Derek Kay, director of
e-business at IBM's Hosting Global Technology Services UK
division.
"Then go out and test the market," he says, ensuring that you
check the service supplier's security meets audited standards, and
that the cost, track record, and size of the customer base is
convincing. Also check that the supplier has international support,
if it is required.
"It is simplicity itself to extend an IT system to ours. All of
the clever tech stuff is locked in a room with IBM, and you just
have to bridge your network to ours with an internet connection,"
says Kay.
How technical the user wants to be depends on the individual, he
says. "Some CIOs and IT directors would only feel comfortable if
they understand the technology, as some have been stung before. We
love showing it off and they can get down to any level of detail.
Others may just want to look at the balance sheet."
IT managers should be aware that there are some applications
that do not lend themselves to the hosted application treatment,
and these tend to be where the processing needs to be closer to the
user because the software uses a lot of data. Computer aided design
(Cad) and computer aided manufacturing (Cam) programs, and
applications that are highly graphics and video intensive come
under this category.
Overall, Kay recommends that users focus on the cost, complexity
and compliance arguments of software as a service, as it can offer
fixed monthly costs, reduced complexity, and guaranteed compliance
which suppliers become responsible for maintaining.
Hosted application services are becoming more technically
sophisticated behind the scenes, says Kay. But he added "more and
more customers are getting less and less interested in behind the
scenes - this almost implies that business users put more trust in
the fundamentals of IT, and can see where IT has an impact."
There is a move to a much more service oriented approach, with
much more open systems componentry.
According to Bradshaw, the future of on-demand applications
includes much broader market penetration for the services. "In the
UK we expect about 30% of business applications software sales to
be software as a service by 2010," says Bradshaw.
There will also be a blurring of the boundaries between software
as a service and business services, he says. "Experian, for
example, is arguably a larger player in hosted applications than
Salesforce.com - it all depends where you draw the line between
software and business services.
"We expect to see a lot more companies using hosted applications
- either their own, or someone else's - and doing this in an
evolutionary way."
Bradshaw adds "We expect some suppliers to offer software as a
service in the same way Google offers the enterprise search utility
- in a box that the user just switches on and uses, but the
supplier manages remotely.
Case study: Skyworks gains agility with on-demand
apps
Skyworks is a global provider of radio frequency components and
mobile communications systems, and operates in an industry where
the marketplace can change dramatically, and products are complex,
with short lifecycles.
By adopting IBM's Applications on Demand and application
management services, Skyworks found that it could cope with the
fast-moving industry conditions.
The company was formed in 2002 through the merger of Alpha
Industries and Conexant Systems' wireless communications business.
Skyworks is headquartered in the US, but has 4,000 employees
worldwide, with 60% located outside the US, in Europe, Asia Pacific
and Mexico.
Skyworks chose Corio, now part of IBM Global Services, to manage
a number of systems which involved the daily running, tuning,
administration and maintenance of Skyworks' SAP R/3 enterprise
suite, SAP Basis middleware, and Lotus Notes and Domino
communications platforms.
The agreement allowed Corio to handle peaks in demand for
applications and ensure that the applications ran smoothly around
the clock. In addition, it was essential for the system to be
supported globally, as Skyworks has major offices around the
world.
Peter Sebilian, director of IT infrastructure at Skyworks, said,
"A key factor in making this change was the need for 24x7 support
for our global operations. To develop that in-house, in our dynamic
environment, is unrealistic."
Sebilian added that by moving to a hosted environment, the firm
managed to cut its overall IT expenditure by 18%.
Don't miss the webinar
On Wednesday 6 December at 11am, Computer Weekly in association
with IBM will be presenting a webinar - or web seminar - entitled
"Driving business efficiency with Applications on Demand". For
further details and registration visit:
www.computerweekly.com/webinars
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