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Will IT buyers again stick out their necks?

CNET News.com's Charles Cooper says "software as a service" might yet take off, but that depends on how lucky--or how brave--IT managers feel these days.

Let's be honest about it: Enterprise software is deadly boring. Presented with the choice of boning up on the finer points of personnel management and payroll processing applications or ripping my brains out with a plastic fork, I would not dismiss the latter option.

But after two-plus years in the dumper, enterprise software suddenly became one of the sexiest technology stories of 2003.

Some of the credit goes to Larry Ellison, who stirred the pot when he vowed to break up PeopleSoft's union with J.D. Edwards and then threatened to shoot Craig Conway's dog. Although he came up empty-handed, Ellison is still on the hunt and promises that Oracle will capture PeopleSoft--even if it takes another year to bag its prey. To be continued.

Away from the floodlights, there's a more interesting angle to the enterprise software business that has nothing to do with mergers, acquisitions or the emerging criminological specialty of canine homicide: This is the Lazarus-like revival of the concept of "software as a service."

Many of you may remember this ungainly buzzword, which got a lot of play a few years ago, when Microsoft began to beat the drum for .Net. At the time, Steve Ballmer and his entourage were gushing about how a strategy shift toward selling software as a service through subscriptions would transform the face of IT--if not Microsoft.

As it turns out, it was neither. In part, Microsoft's own missteps undercut customer acceptance. But just as important was the blowup of so many application service providers, after the economy began to slip into recession. ASPs were around aplenty back then, but too many of them just couldn't pay their bills.

The idea behind hosted applications, where customers essentially rent what they need, is enjoying a comeback in these times of failed expectations and reduced IT budgets.
But the idea behind hosted applications, where customers essentially rent what they need, is enjoying a comeback in these times of failed expectations and reduced information technology budgets. For many companies, renting software is a lower-risk, attractive option than locking yourself into an expensive single vendor solution.

The question du jour is: How much of a splash is all this going to make?

If you are an IT manager under pressure from a grouchy CEO not to blow any more of your budget on dumb tech stuff, would you roll the dice on a concept that seems so, well, dicey? Also, consider the security implications. Subscriptions and application hosting got started long before the emergence of Sobig, MSBlast and the rest of the Internet worms and viruses became a plague on the technology landscape. Would you sleep safe at night knowing that your data's "protected" by some guy working at another company?

The counterargument is that hosted security is just as good--if not better--than anything found in the average company. And if you listen to some of the over-the-top hype that's emanating from the likes of a Salesforce.com, which shamelessly promotes the software subscription model, the end of software is drawing near.

Folks in the computer business tend to stick with what's comfortable, even though a growing number of them are opting for the subscription model.
This goes along with so much of the self-serving nonsense that passes for technology marketing these days--which is doubly unfortunate, because Salesforce and other like-minded practitioners of applications and content hosting can tell a no-bull story about the benefits they offer customers. Most notably:

• No up-front technology costs.

• Customers don't need to reassign new IT resources from other projects.

• Chief information officers won't need to wait months or years before seeing bottom-line benefits.

"We can do customer re-engineering in the midst of a job," says Steve Kusmer, CEO of Atomz, a San Francisco Bay Area company that provides outsourced Web IT infrastructure. "Based upon customer feedback, we can make any changes within a couple of weeks."

In an interconnected world, that's huge. What could be easier than paying for bits zapped over the wires? When demand changes, so does cost. No fuss, no muss.

But that's not the same as predicting the imminent demise of the Oracles, SAPs and Siebels of the world. Folks in the computer business tend to stick with what's comfortable, even though a growing number of them are opting for the subscription model. How big all this will become boils down to a single question in these post-bubble times: Are IT buyers ready to take chances?