It is the office IT team’s worst nightmare: a memo from management outlining the move to a new CRM package. It will require more expensive servers, weeks of configuration, integration with existing databases, then the inevitable months of tweaking and frustration.
Except this time the software requires no installation, no servers and no gradual roll-out. This package is a new-generation web application (web app) that gives every employee immediate access through their web browser. Suddenly the IT technician’s job is looking precarious.
Web applications are not exactly new – we have all used electronic shopping baskets on e-commerce sites – but now companies can buy entirely web-based enterprise management suites. “We’re talking about full-blown software that, until a few years ago, would have required businesses to buy dedicated hardware to run,” says Julius Ang, a web application programmer and owner of digician.com, a company that hosts and manages web applications. “You can now take that server, rewrite the software, and make the whole thing live on the web.”
The first enterprise web applications to really take off have been CRM solutions. Marc Benioff, CEO of salesforce.com, has seen subscriptions to his company’s CRM-on-demand service grow dramatically over the past couple of years. It now has 168,000 users from 11,000 companies.
Mr Benioff saw the opportunity for hosted enterprise solutions while he was using e-commerce sites like eBay and Amazon. “I was sitting in my office and using very well-done applications,” he recalls. “They were easy to use and robust. I wasn’t installing upgrades and updates, yet these were very complex applications. I asked this question: why aren’t all enterprise applications like Amazon or eBay? Why do software companies still write applications as if the internet does not exist?”
The arguments in favour of web applications are similar to those used to push the applications service provider model that received so much hype a few years ago. By outsourcing their applications to specialist service providers, companies can save time and money. They do not have to buy, maintain and upgrade software or hardware, and can limit the number of IT staff they require. Smaller companies can do away with IT staff entirely – all they need is a simple network with internet access.
Tom Pringle, an analyst at Datamonitor, says that the strongest argument for web applications is the pricing model. “Hosted applications are usually subscription-based, usually with a fixed fee per user per month. Companies can therefore turn large capital expenditure into manageable operational expenditure.”
Web applications also reduce the risk for subscribers. According to Gartner, the analyst, over half of companies are dissatisfied with their CRM implementations. “It’s the only place in the world where that kind of failure rate is accepted,” says Mr Benioff. “Web-based CRM removes the cost, the risk and the fear of failure.”
While CRM is leading the web application market (salesforce.com competes with Siebel OnDemand and hosted versions of Microsoft CRM), other enterprise software is equally suited to this model. Mr Ang, for example, has written a retail management application for a chain of bathroom showrooms in north-west England. “This chain has four branches in the area,” he explains. “Previously, they had a central server, with an IT manager and all the necessary back-up systems, plus a server in each branch to collect data and send it to the central server overnight. Now all they need is an internet connection – they don’t even need their PCs to be up to date!
“This application manages 100,000 product lines, from stock control and warehousing to cash management and dispatch control. All the information is in real time. The staff carry pocket PCs around the showroom so they can take orders while accompanying customers. And the managers can even access information with their mobile phones, so they can see sales data from the different branches whenever they want.”
Nevertheless, with the exception of CRM, enterprise web applications remain uncommon, despite the many advantages. Mr Ang argues that the slow transition is due to lack of awareness both among programmers and potential customers. “In the developer community, Microsoft seems to talk a lot about web services that allow programs to talk to one another, but they don’t seem to be pushing the potential of enterprise web applications. Many companies are also unaware of how the technology has progressed in the past few years. And software vendors don’t want to rewrite their legacy applications from scratch to make them usable over the web.”
The biggest question for many enterprises, however, is security. “This isn’t really an issue,” stresses Mr Ang. The hosting servers are located in dedicated data centres that probably have far better security and disaster management than most company’s IT server rooms. As for the security of data, the internet is pretty secure. If banks trust the internet to move money around, then most companies need not fear.”
Perhaps the real obstacle for many companies, suggests Mr Benioff, is that web applications make them do business in a different way. “You will be running a business like never before. For many customers it is honestly a shock. They are forced to operate their business differently.”
Mr Ang agrees. “The major advantage of web applications is that more people can use them. Once a retail chain is using a web application for all their ordering and warehouse management, for example, it is relatively simple to roll out the application to suppliers and distributors – everyone up and down the supply chain.”
“My vision is that web applications will transform business,” he adds. “Hardware will not factor as part of a businesses IT solution anymore. Having servers is slowly becoming a non-issue and users will be concerned about service, not how to look after it.”
How long it takes for the idea to catch on is questionable, but Mr Benioff is certain that the enterprise software landscape will look radically different in 10 years’ time. “To say that we will be using software in exactly the same way as we do today is ludicrous. In IT, people always tend to overestimate what can be done in one year, but they underestimate what can be done in a decade.”