Software is dead; long live software

Are Web-based tools killing off desktop software? The efficiencies and convenience of online tools are attracting a growing number of tech-savvy users, but consumers don't seem quite ready to write retail software's obit.

When Shane Sareli jots down ideas, whether to keep tabs on a budget, to track cool-looking restaurants, or to brainstorm for work, he turns to Google Docs & Spreadsheets instead of Microsoft Word or Excel. The free, online tools allow Sareli to access documents from a Web browser, then invite friends or coworkers to work remotely on the same page at the same time.

"It's pretty convenient because I have computers at work and at home," he said. "It's too much work to centralize and back up my data, because it's spread all over the place."

As a product manager at an Internet advertising agency, Sareli is drawing on tech savvy that may be a step ahead of that of the average consumer. Yet he joins a growing number of people who access applications via Firefox or Internet Explorer rather than relying solely on software stored on a personal computer's hard drive.

Many cheerleaders of next-generation Web technologies happily paint software as destined for its deathbed. In this view, instead of downloading or buying boxed programs such as Microsoft Office, Adobe Photoshop, or Intuit TurboTax, the masses are turning to the Web to compose documents, retouch photos, and file their taxes.

Web tools enable geographically scattered workers to collaborate. They make data more portable, eliminating the need to e-mail documents around or pocket them on USB drives. And even Windows Vista or Mac OS X might look obsolete when a lineup of browser-based tools can juggle the same tasks as an operating system.

On-demand online tools, such as customer relationship databases from Salesforce or conferencing tools through WebEx, are poised to mature from $3.6 billion in 2006 revenue to $14.8 billion by 2011, according to IDC research. The firm projects software as a service to expand at a 22 percent rate in the same period, more than double that of enterprise applications.

Pragmatic blends
Alternatives to desktop-dependent tools are advancing, but it's unclear whether the use of free and subscription-based Web services is cutting significantly into consumer software sales.

For instance, Sareli still uses Microsoft Excel for complex spreadsheets, and the success of Microsoft Office 2007 suggests that most people haven't kicked the retail software habit. Sales of Office 2007 more than doubled those of Office 2003, according to the NPD Group.

"Before I write the obituary for Microsoft Office, I want to see a downturn in sales," said Chris Swenson, an NPD Group analyst. "Just because you offer something for free doesn't mean you're going to be the industry leader the next day."

In a poll of 600 consumers, nearly three-quarters told the NPD Group they hadn't even heard of online productivity apps, including Google Docs. Just 4 percent said they paired such online tools with installed software, while a tiny 0.5 percent replaced their desktop offerings entirely.

Google Docs & Spreadsheets has attracted "millions" of users since launching in beta form less than 15 months ago, according to Google, which won't share more-precise figures. The service attracts some 1.4 million visitors monthly, although the average time spent there amounts to a toe-dipping of a few minutes, according to Compete.com.

Among rival products, Zoho's Docs and other tools last year expanded their user base of 150,000 to almost 600,000. Zoho maintains that it will offer all of the features available in Microsoft Office by the end of this year.

Still, some of the same numbers proving the popularity of Office also could be seen as signs of the decline of the desktop. The overall U.S. retail software market grew by 10 percent last year, according to NPD. Office hadn't been revamped for four years, and it accounted for two-thirds of the market's growth in dollars.

The top-selling retail software titles of 2007 were flavors of Microsoft Office for Windows and Macs, and TurboTax. While sales of the desktop version of TurboTax have flattened for three years, usage of its online counterpart has more than doubled since 2003, according to Intuit. The government's e-filing program has helped lure users of tax-preparation services to the Web. The shift among users of other types of applications is less dramatic, however.

Microsoft itself has resisted building browser-based replicas of Word, Excel, and PowerPoint, instead aiming to bridge the desktop-browser divide with Office Live Workspace. That service, which remains in beta testing, lets users access and share documents, but it requires opening Office software locally to make changes.

"We're an on-ramp to the Web," said Eric Gilmore, product manager for Microsoft's Office Live Workspace. "There's no question that more and more stuff will be on the Web, the capabilities will be exposed, and people will have a choice of where they want to use the tools."

For many years, the majority of big-name software releases have been updates of old tools. The latest innovative titles, by contrast, require lightweight downloads or none at all and bear quirky names that few households know, much less know how to pronounce.

Along with the emergence of Web 2.0 as a buzzword and set of technologies have come media dedicated to examining the new tools. TechCrunch, the most popular blog on this beat, counts 623,000 readers and has covered some 2,500 Web services. That and other blogs including Mashable, Emily Chang's eHub, and CNET's Webware follow new tools every day.

"It sure seems like there's less and less reason to use anything but a browser these days," said Michael Arrington, editor of TechCrunch. "It's coming from two directions, the early adopters who are always a sign of things to come, and also the Internet cafe generation.

"What you're going to see spread is people thinking of Word documents as a link, not as an icon on the desktop, just like the current generation doesn't think of music as a CD but as a file on a computer."

As noted above, however, it may be too early to cue the requiem for software, in part because its definition is evolving. More new services are bridging gaps rather than altogether replacing applications that live on a hard drive. Apple's iTunes is one such hybrid tool. And Mac OS X and Windows Vista are popularizing desktop widgets, which are fed by data from the Web.

Bandwidth and economic factors
The shift also can be seen in services such as Apple's .Mac, which enables users to publish to the Web and synchronizes online and local content. Sold in a box containing a license key and no discs, .Mac could be considered webware. It's also the most popular software for Macs next to Microsoft Office, according to the NPD Group.

Microsoft has been promoting its Windows Live brand of online and desktop apps.

Many of these new services enable people to post content online and manipulate it on the fly, from either a browser or desktop. Yahoo's Flickr photo-sharing site, for one, last month made Picnik, a Web-based image editor, available to some 20 million users.

The workflow shift away from the desktop can be so seamless that people don't recognize it, said Kakul Srivastava, senior product director at Flickr, which provides uploading tools both within its interface and as a download.

"We're not just replacing the desktop exclusively with something else," she said. "Rather, we're making the entire Web experience richer. It should feel very natural."

Due to bandwidth constraints and the need for computing muscle, experts agree that specialized apps such as video editing are likely to move from the desktop to the online "cloud" late in the game.

Yet Adobe already offers the Web-based Premiere Express video editor, and it plans to release a Web-based Photoshop early this year.

The battle between the desktop and Web services is developing in different ways around the world depending upon the availability of high-speed Internet access, computer ownership, and mobile usage habits. Web-based tools for productivity and other tasks are likely to catch on quickly in developing countries where people who don't own personal computers rely upon Internet cafes, said Arrington of TechCrunch.

Getting more people to entrust the ephemera of their personal lives to invisible Web servers, as more Americans are doing with their tax returns, is another matter.

Meanwhile, software developers are gearing up on the back end to bring Web and desktop data closer together. Key roles are being played by Adobe's Flash, Flex, and Apollo; Microsoft Silverlight technologies; as well as Ajax coding.