February 2005 issue
Manufacturing Business Technology Magazine
So I was wrong about the Segway
By Sidney Hill, Jr.
Salesforce.com, the on-demand CRM trailblazer, has 214,000 subscribers spread across more than 13,000 customer accounts. Arena Solutions, which offers product life-cycle management (PLM) software in a hosted model, has posted revenue growth of at least 30 percent for nine consecutive quarters. Perfect Commerce has 190 Fortune 500 companies, with a total of 165,000 users subscribing to its supplier relationship management (SRM) software service.
Somewhere a former Appshop executive is saying, "I told you so." That barb would be directed at me, the smug reporter who six years ago scoffed at Appshop's plans for building a hosting business specializing in Oracle applications. I actually thought the one high-profile client Appshop had at the time-the company that makes the Segway Human Transporter-had a brighter future.
How times have changed. Last June, Appshop was purchased by USi, a company that started out hosting e-commerce Web sites during the dot-com era. Although it struggled after the dot-com bubble burst, USi is now turning a profit by hosting enterprise applications like Oracle ERP and Ariba spend management, among others. Meanwhile, the only Segway Human Transporter I've seen the past few years is the one George W. Bush crashed.
I must say Appshop's argument about getting systems running quickly and cheaply just didn't resonate at a time when no one was scrutinizing IT budgets. Today, conventional wisdom says the budgetary pressure placed on IT executives is fueling growth of on-demand software contracts. But I think something bigger is happening.
Sure, IT execs like the lower expenses and reduced headaches the model offers, but hosted software providers wouldn't be enjoying their current growth spurts if the IT industry had not experienced a major attitude adjustment.
Six years ago, IT people generally viewed the acquisition of software the way most people see buying real estate-it just didn't make sense to rent when you could buy. Most IT people also felt turning over control of corporate data to an outside firm was risky.
Since then, however, the concept of technology as a service has become a fact of life, and I believe this is making it easier for IT executives to accept it as a fact of business as well.
Most North American households have an Internet Service provider that collects a monthly fee for managing personal e-mail. It's also common for people to shop over the Internet, using confidential information like credit-card numbers.
Nearly two million people are paying $12.95 a month to have Tivo record their favorite television programs, and five million people are shelling out between $9.99 and $12.95 for the XM and Sirius satellite radio services.
Scott Milligan, director of sales process development for JLG Industries, a manufacturer of aerial work platforms, recently told me his biggest fear about signing on with salesforce.com was whether the vendor would be in business three years later.
That's something all users must fear-whether buying or leasing software-in this age of vendor consolidation. That means the on-demand model is definitely mainstream. I guess we all can expect to be riding Segways soon.