In reference to hosting applications in this new Cloud world I recently heard from a guy I admire and respect, “We’ve been here before and all that came out of this was a bunch of hype.” When we consider what happened to the Application Service Providers in 2000 that is a fair assessment. So the million dollar question(s) today is who is making money hosting applications, what applications are they using and who are they selling these subscriptions to?
The answer is a bit complex because hosting service providers come in many shapes and sizes. However, if we only take into consideration those service providers who are actually charging for application delivery (subscription of applications) and not outsourcing companies who are mainly infrastructure providers, we can distill the market down to just a few distinct categories. The chart below is a depiction of the types of applications most subscribed to in this emerging space.
Human Resource Management Systems, Collaboration and Communications, Customer Relationship Management and Content Management Systems top the list of applications being delivered via hosting among Small and Medium Businesses (SMB). When we look at the practical application of these services, there is a business reason for why this is happening.
Smaller companies do not have the capacity for overhead related to support functions within Human Resources such as Payroll, Talent Management, Employee Review processes, etc. It makes absolute sense that these services would be either completely outsourced or applications hosted that perform the needed function.
In order to cut the cost of expense items such as travel, Collaboration and Conferencing using the Internet and hosted applications is a sure fired way to accomplish this. I’ve got to plug Citrix Online here… some say the 3rd largest SaaS concern in the world for this category. Corporate email is a good fit in this category as well. There are currently over one hundred million unmanaged electronic mailboxes worldwide today and using email that has no business continuity is dangerous and unprofessional. SMBs use hosted business email such as Microsoft Exchange to mitigate this issue.
Customer Relationship Management services shouldn’t be a surprise to anyone with the success of Saleforce.com. But there are many CRM packages used in this space. Using a product like XenApp to virtualize applications opens the door to products typically used in the Enterprise but can now be scaled to operate in the larger Internet cloud. Citrix has customers today who (internally) host CRM software using XenApp to thousands of end points in remote locations worldwide.
Content Management Systems may be a bit of a surprise for some. However, document management and workflow is a critical need especially in market verticals such as Healthcare (HIPAA) and Finance (SOX). When requirements of this magnitude are levied on the SMB the overhead can be overwhelming. So the IT management of a system like this is a burden not many SMBs are willing to bear. Application hosting is a cost effective alternative. I recently spoke to an ISV in this space who started selling his application to SMBs in the insurance industry. It became unmanageable to scale his business so he started to host the application 8 years ago. Now he has 12,000 SMBs using the software.
Order Management, Enterprise Relationship Planning, Web 2.0 applications and Supply Chain Management round out the list. And there it is… the applications making the most impact and therefore the most revenue in the SaaS space among SMBs.
What if business productivity applications such as Microsoft Office could be offered up through the Internet (Cloud)? Service providers who have tried this before might say that this is impossible because Office wasn’t designed to be hosted… but what if you could do it using a platform that could make Office run as though it were local? Wouldn’t that be great? Citrix has the technology and the products to accomplish this and my guess is it won’t be long until service providers (in 2009) actually use it to host these types of applications.
Here’s another surprise. In an economy that is shrinking in virtually every other aspect of IT, applications hosting is still growing. What are you waiting for?