6/1/2006 | 3 MINUTE READ

On-Demand Software

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What are the pros and cons of on-demand software and which applications are right for on-demand?

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Most shop owners didn’t open their doors so they could become experts at accounting, property management or information technology (IT). Unfortunately, those are the things that business owners tend to spend their time on instead of running the business. Fortunately, a major shift is underway that is going make your life a whole lot easier and allow you to use integrated systems that previously were just too complex and not worth the effort for the size of your shop.

Typically when you buy software, it comes in a box on a CD and you install it on your shop network. This is typically referred to as shrink-wrapped software. To configure the software and your network is very time-consuming and requires constant attention. Oftentimes there are issues because new versions of the software are released that you will need to install and configure, hardware breaks that have to be replaced right away, and you must constantly back up your data to be sure you don’t lose anything in the event of a catastrophe. Not only is it time-consuming to maintain shrink-wrapped software, it also is expensive to keep upgrading the software and hardware.

Soon you will see many applications offered on an on-demand basis via the Internet. There will be no software or hardware to buy or maintain. You will simply open your Internet browser and start using the software. It will be streamed to you on an on-demand basis. This on-demand model is the future of software delivery and is better for everyone … except perhaps software vendors that miss the boat and don’t transition their software to an on-demand model fast enough.

The revenue model for on-demand software is very different than the one you are used to for shrink-wrapped software. With your current software, you typically purchase a perpetual license to use the software and then you pay an annual fee to get the upgrades. You will use on-demand software on a subscription or pay-per use basis that will include use of the software, hosting of the software, backups of your data and all of the upgrades. Upgrades to software will happen very fast because the vendor will not have to produce and ship CDs, they will just make the new code live on the server and anyone accessing it will instantly have the latest version.

The benefits to you are many. There will be no software or hardware to buy or maintain and you can access the system and your data any place that has an Internet connection. Because your software will be online you will be able to quickly integrate with online software that your customers and suppliers are using.

There are numerous examples of on-demand applications running right now on the Web. For example, when you check your e-mail online, that is an on-demand application that allows you to send and receive e-mail. Microsoft has a version of MS Office software that is available online as an on-demand application. For manufacturers, MFG.com is an on-demand application that brings buyers and suppliers together at the exact moment the buyer has a need and the supplier has the equipment, expertise and capacity to fill that need.

Certain applications that are not very processor intensive will be online as an on-demand application very quickly. However, it will take awhile before you see robust applications such as CAD or CAM being delivered as on-demand applications. The limiting factors are Internet bandwidth, and the fact that the software used to develop on-demand applications is still relatively immature. I truly believe it will happen and it will be in a matter of just a few years. I’m not sure whether to call it an evolution or a revolution, but it will certainly change the face of the software industry and it will be very good for you as a shop owner.

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