With software on demand offering the potential to challenge Microsoft’s desktop dominance, some of the IT industry’s biggest names are scrabbling for a piece of the action.

The past few weeks have seen a variety of products launched by suppliers targeting the corporate market.

Last week, Adobe and IBM introduced word processing and email applications, respectively, that are hosted and accessed in real time online rather than being installed on in-house systems.

The week before, Microsoft announced trials of online versions of its Office suite.
Yahoo is acquiring Zimbra, a hosted email service, as part of its strategy to expand into the business market.

And Google is also in the race. The Google Apps online suite was launched earlier this year and a partnership with Capgemini, announced last month, will deliver and support the software for the consultant’s corporate clients.

The search giant is also buying hosted messaging service Postini, which rivals IBM’s Lotus Notes and Microsoft Exchange.

The software-on-demand model has much to recommend it. It offers a degree of choice in desktop applications for the first time since Microsoft Office.

And it has the potential for greater agility in responding to rapidly changing business requirements because the applications are no longer a static, capital asset on internal servers.

Tools available online can be updated more quickly, and security could be improved because virus patches can be released and updated in real time.

There are also licensing benefits. Software as a service could help get around what are often perceived to be restrictive and lengthy licensing arrangements.

Many large users are interested, according to Ollie Ross, head of research at the Corporate IT Forum (Tif) user group.

“There is not wide-scale adoption yet, but increased numbers of IT chiefs are investigating the advantages that these newer subscription models might bring to their businesses,” said Ross.

But adoption will be approached cautiously.

“Many firms will limit early deployments to low-risk areas of the business,” she said.
“While freeware is now commonly used in back offices, anywhere customer-facing is still broadly considered out of bounds.”

The key for Microsoft’s challengers will be to persuade potential business users that software on demand is reliable, said Forrester analyst Duncan Jones.

“Initial corporate reaction will be to prevent moves towards the new model,” he said.

Take-up will also be affected by concerns over the compatibility of documents, advertising, and security and support issues.

Smaller businesses could be at the vanguard because they are more likely to be persuaded by the cheaper prices and lower capital investment.

But once the model gains widespread consumer and small business support, large companies will follow, said Jones.

“If staff are using these tools, eventually large corporates will be won over – if they are reassured that there are appropriate security measures,” he said.

For business users, the upside of all the jostling among suppliers will be the effect on prices.

Microsoft’s Office suite accounted for revenues of $4.6bn (£2.26bn) – a third of total sales – in the company’s most recently reported quarter, so threats to its business will be taken seriously.

And Google has signalled its intent by entering the corporate email market at a competitive $50 (£25) per user per month.