Hosted applications and services are really popular right now. These are software systems or facilities that are located at a data centre that organisations access typically via the internet, and can include anything from full servers, mail servers, CRM software or even telephone systems.
Compared with the traditional alternative of software and hardware purchase, typically initial setup costs are low and little local infrastructure is required other than a broadband connection and a PC or Mac. The most popular applications include Microsoft Exchange, Microsoft CRM, Salesforce and now even VoIP telephony. Sounds interesting? Here are some of the key 'Pros' and 'Cons'.
Pros
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Low setup costs - A typical CRM application for a small business may cost several thousand pounds in server hardware and software, by comparison hosted services can cost from as little as £35 per user per month.
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Scalable - Users can typically be added either in a main office or at a remote office very easily as the host infrastructure is normally huge compared with a locally hosted environment.
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Fast deployment - Servers and systems are already set up and in place.
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Tax deductible - Rental not capital purchase (but I'm not an accountant!)
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Ease of management - typically backup and maintenance is included.
Cons
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Only as good as your internet connection - If you have a basic broadband internet connection, then you are risking availability of your connection to these hosted services. Not a problem if you have lots of remote workers but if you are hosting your phone system and lose internet for five days, your phones go too!
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Long term costs may well be higher - I have found about 18 to 24 months is the breakeven point on most installations we have carried out.
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Limited interface to existing systems - hosted applications may have limited connectivity with your local databases and integration can be more costly.
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Flexibility - in a shared environment products are typically 'one size fits all'.
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Data transfer speeds - again, only as good as your internet service, transferring data to a server on your network could be 100 times faster than an upload via internet.
We are getting lots of enquiries on hosted services, it really boils down to having an appropriate internet connection; with leased lines costing £4000 plus per annum, this can swallow a significant proportion of the savings. Perhaps a better way to look at these services is to examine if the advantages stand on their own without the cost savings.
There is no doubt that use of hosted services is increasing rapidly and with increased offerings from major players including Google and Microsoft, the sector will continue to expand. In a further article I will talk about forthcoming changes and development in internet connectivity - it will have to keep up in quality and speed!
***** Edited 27/03/09*****
Take a look at Law.com's legal technology blog article on CRM / SaaS in a legal environment ...
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