Web-hosted office suites are here to stay

Adison & Partners is a small yet emblematic part of a major shift in how office software is sold and used.

No, Adison & Partners isn't a Web 2.0 Silicon Valley startup. It's an eight-person executive recruitment company in New Jersey. Its founder and managing partner Jim DiPietropolo doesn't know what a "wiki" is.

This he knows: choosing a Web-hosted suite of communication and collaboration applications has greatly benefitted his business.

Like Adison & Partners, thousands of organizations, large and small, are researching and implementing hosted office suites as alternatives to pricier, traditional options, like Microsoft Office, designed to live in PC hard drives.

Sure, IT buyers, whether chief information officers at large companies, small-business owners or self-employed individuals, must study the options carefully and ask hard questions about these software-as-a-service (SAAS), on-demand suites.

But while "fools rush in" mistakes are bad, an even worse decision regarding the SAAS model is ignoring it. That's particularly true for large organizations.

"Now is the time to definitely have advanced technology folks and strategy people, the ones who look a year or two ahead, to look at this stuff and stay abreast of it, even if the time isn't yet right to purchase," says Burton Group analyst Guy Creese. "A huge mistake would be to look at the offerings today, say they're immature and then not pay any attention."

The offerings are uneven, with some suites strong in webmail, while others focus on productivity applications like word processing and spreadsheets. Many key architecture, business and technology questions await answers.

But the SAAS model for these office suites is here to stay. Many big vendors are either openly embracing or likely to enter this market.

Google Inc. is committed with its Google Apps suite, as is Cisco Systems Inc. with the WebEx WebOffice product. Salesforce.com Inc. certainly could stake out a strong position quickly, applying its experience in the CRM (customer relationship management) SAAS market. Several smaller vendors have strong offerings, including Zoho and Zimbra.

Then there is Microsoft Corp., whose inability or unwillingness to come out with a hosted suite comparable to Google Apps many find befuddling. Microsoft Office is the dominant productivity suite in the packaged software.

That may be the problem. Many wonder if Microsoft is struggling with how to develop a hosted version of Office without cannibalizing the suite's packaged software business.

"A challenge for Microsoft is to figure out how to get people to buy the next version of Office if there is also an on-demand version," says Rebecca Wettemann, an analyst with Nucleus Research.

Another reason for Microsoft's perceived deer-in-the-headlights reaction: "They're not innovating the way they were 10 years ago," Wettemann says.

However, it's widely assumed Microsoft will respond at some point and have a significant effect on the market.

"I think Microsoft needs to worry about it now because it takes a while to get it right," Creese says. "In hosted office suites, it's going to take a while for companies to figure out how they want the thing to work."

In its defense, Microsoft officials have said that Office has steadily gained hosted service components for years, and that combining core PC software with SAAS capabilities is the right approach.

With Office Live, Microsoft offers a set of hosted services for small businesses, like Web site creation and hosting, while Office Online offers Office online resources.

Last week, Microsoft announced a unified installer to help users download updates for its family of Windows Live hosted services. Yet, those who have been waiting for Microsoft to make a power move in the hosted office space found the announcement underwhelming and dismissed it as cosmetic.

While Microsoft mulls its move, rivals like Google continue boosting their offerings.

This week, Google and Capgemini announced that the large IT services provider has become a partner for the workplace version of Google Apps. Capgemini now provides training, support, integration and other services to large organizations that implement Google Apps Premier.

"I'd expect more and more IT services companies will offer that kind of help desk and support around the Google Apps Premier environment," Wettemann says.

While many organizations ponder SAAS productivity suites, thousands of others have already implemented them, lured by their benefits.

For Adison & Partners's DiPietropolo, the discovery of a SAAS office suite followed a disaster.

Three months after launching his company, his laptop's hard drive, loaded with critical documents, imploded. Recovering the data cost DiPietropolo dearly. He resolved to prevent a similar disaster.

He knew larger companies had server-based back-up systems managed by IT professionals. He assumed the cost of a modest set up would break his budget.

Then the entrepreneur found WebEx's WebOffice, a Web-hosted office suite which, for a monthly fee he finds affordable, gave him what he was looking for.

"It was a revelation to me that a small business owner could afford something like this," he says.

The six employees in New Jersey -- two others work in Albany, New York -- have been office-less and working from home for the past several months, because the completion of Adison & Partners' new digs is delayed.

Having documents and calendars stored centrally in WebOffice servers "ties everyone together," says DiPietropolo, who founded the company about two and a half years ago.

WebOffice also lets the staff nimbly respond to client requests from anywhere, by tapping remotely into databases and getting information on the fly.

"From a business development standpoint, this has been a differentiator for us," he says. "This ability to instantaneously respond [to queries] really impresses clients."

Because the suite is hosted by WebEx, he doesn't have to worry about tuning its hardware and upgrading its software.

Like DiPietropolo, many IT buyers find that hosted suites let them save on hardware and software installation and maintenance, while making it easy for employees to share and collaborate on documents, for a fraction of the cost it would take to implement an in-house messaging and collaboration system such as Microsoft's Exchange and Sharepoint or IBM Corp.'s Lotus Domino/Notes.

Disadvantages include security concerns over hosting sensitive data with a third party beyond the corporate firewall, as well as downtime incidents that leave the organization without access to the hosted applications.

Upon close inspection, existing SAAS suites reveal themselves as strong in certain areas and less so in others. In a recently published and widely discussed 55-page report, Creese took a microscope to Google Apps Premier, dissecting its pros and cons in detail.

For example, Creese found the suite lacking in archiving features, such as records management and electronic discovery, as well as in analytics capabilities, such as analysis of content creation patterns.

Google responded with a statement saying that the suite gives organizations "a new set of choices, many of which will complement and extend the power of the desktop, enhance group productivity and improve collaboration."

Most analysts, users and vendors generally agree that hosted suites and packaged software suites, each with its advantages, work best in tandem, complementing each other.

"We'll see more and more organizations that look to a tiered strategy for the way they deliver desktop applications. So rather than have a standard desktop, I may give Office to the folks in finance who really need Excel, while the folks in marketing may be fine within the Google environment," Wettemann says.

At SF Bay Pediatrics in San Francisco, employees use Microsoft Office in conjunction with the Google Apps word processor and spreadsheet applications, says CIO Andrew Johnson.

Meanwhile the Gmail Webmail component of Google Apps has proven a major improvement over the previous situation in which individual employees used a variety of personal accounts, Johnson says. The option of bringing in an Exchange server for e-mail would have been too expensive, he says.

Peter Gilbert, an independent IT consultant in New York whose one-man company is called PG Systems, swears by Zimbra's suite. Previously for e-mail he used a shared hosted Exchange server. But the hosted Zimbra suite gives him much more, like a hosted document repository and a centralized contacts manager.

"I see Zimbra's collaboration suite as a solid backbone for my business," he says.

Copyright © 2007 IDG Communications, Inc.

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