Technology Focus Part 1 To Host or Not To Host?

By Ernie Schell

What is "software?" The easy answer is a computer program designed to execute one or more specified functions. But in 2006, the reality is that there is no easy answer.

Over the past five years, there's been a revolution in the so-called "software as a service" (SaaS) arena. This is something of a throwback to the 1970s and before, when a centralized mainframe served selected views of software programs to a user's "dumb terminal." The terminals were "dumb" because they did no computing. You entered data into the interface and the mainframe did the computing, sending the results back to your terminal.

These days, your dumb terminal is a Web browser. Virtually everything you do on the Web behaves the same way as a dumb terminal (with exceptions such as cookie management that make use of your computer to streamline the experience). The "program" you're interacting with is on one or more servers over which you usually have no direct control other than through the interface that the program presents to you.

And with service-oriented architecture (SOA), the view you see may differ from the view anyone else sees, depending on your needs and permissions and past history of interactions — although virtually any program can include this kind of variation.

So what does this have to do with managing your e-commerce business? Plenty! Many say the days are numbered for the traditional order management and fulfillment system, which you pay for by seat license and manage in your IT department on your own servers.

Several innovative vendors have been offering hosted solutions for some time now. Hosted and SaaS solutions virtually are identical, although the term hosted is associated with an application service provider (ASP) and somewhat tainted today because of its association with systems that never were designed to be delivered over the Web but were retrofitted to do so.

Consider the term "hosted" as a neutral description of systems managed by the vendor on servers under the vendor's control (typically at a secure off-site location), and consider it, simplistically, as interchangable with SaaS.

Payment Objections

Before reviewing the pros and cons of this arrangement, let's cut to the chase. The biggest objection catalog/e-commerce marketers have to hosted solutions is that they're essentially paying for the system according to order volume (or alternatively on a periodic fee basis, albeit derived from volume). It's like riding in a taxi as opposed to renting, leasing or buying a car (whether you pay by the mile/minute, or on a fixed fee basis to the airport).

Five years ago, this was a valid objection. But since then, e-commerce has become such a large and growing aspect of every cataloger's business that there is a general concession that some form of "pay-as-you-go" or pay-for-volume" is the only way to pay for the use of e-commerce platforms.

So, the logic goes, if we're paying for 35 percent, 40 percent or more of our orders on a volume basis, why not go all the way?

The financial aspects of a hosted solution can be finessed in that fashion, but there's a second and even more problematic issue for a substantial number of catalogers and e-commerce companies: If you need a highly customized system, SaaS may not make much sense.

One Size Fits All

To be sure, you can have software vendors customize a solution for you and host it at their site just for you, providing access to your users via Web browsers. But this one-off approach isn't what most vendors have in mind when they talk about a hosted solution, although it's exactly what an ASP is all about. SaaS presupposes that while the system may offer a vast array of options, the combination of options you choose to use will be those available in the standard solution.

In a true SOA environment, the "options" you select would be true Web services, and highly configurable. But we haven't really reached that level of sophistication yet with hosted direct commerce systems.

Many companies actually don't want customized systems, because they understandably are afraid they'll become "orphaned" as the standard version of their system is enhanced in future versions. Thus, there's a growing receptivity to SaaS in the e-commerce world.

Among a hosted solution's advantages, you don't have to invest in expensive server hardware that requires constant upgrading as technology changes. You also don't need a large IT department to baby-sit the hardware. All you need is inexpensive "thin" clients, i.e., cheap PCs that behave just like dumb terminals with a graphic interface.

Another advantage is quick implementation — typically weeks rather than months. And as your business grows, the cost of managing this growth is reflected only in your fee, rather than in replacing or upgrading your hardware.

The Linkable Option

Since the hosted system has a browser interface, it's also available to any platform that can link to the Internet, whether it's a laptop in Lapland or a handheld PDA in your warehouse or a sales rep 1,500 miles away.

There's one other issue: Browser interfaces tend to have a different look and feel than standard programs, often with a less efficient use of screen space. For instance, they require several screens to enter an order rather than the efficiency of single screens in a traditional solution.

This issue is being addressed. Web technologies such as AJAX are giving browser interfaces a much more traditional look and feel. Once hosted solution providers begin to widely adopt techniques, such as drag-and-drop, you'll find it difficult to tell whether the system you're using is running on your PC or in a browser.

Chances are, the next solution you invest in will be a hosted SaaS application.

Ernie Schell is director of marketing systems analysis and manager of The Guide to Direct Commerce Systems and Services. Reach him via e-mail at ernie@schell.com.