Also referred to as on-demand software or even software as a service, hosted software is most commonly used by SMEs (small and medium sized enterprises) who have a fairly small IT department. This software solution makes it easier for smaller companies to maintain and update applications from a central location, while also offering a cost-effective solution that can be used by entire departments. Hosted software has been used for many years under various guises, but as advancements in web technology and the growth of high speed Internet have come about, this option has become far more widespread.
Previously, it was only large companies who outsourced IT solutions, as these companies were able to negotiate fixed contracts that cut down costs while outsourcing IT recruitment and management to specialist organisations. Most systems were mainframe based, needing plenty of memory and complex infrastructure. Nevertheless, the outsourcing model worked well as systems were huge, often with a broad reach that matched the high costs that large companies were easily able to afford.
The Implications of Software Ownership
However even though the large companies could consider this option, small and medium sized companies could not afford to outsource. Outsourcing also required in-house IT experts to oversee the outsourcer, and as most SMEs were unlikely to have an in-house IT team they tended to use basic desktop tools, rather than actively sourcing applications that would help improve overall productivity. In some instances rather than having the know-how to purchase cost-effective software that could be used by current employees, many companies would end up employing staff to do manual tasks instead.
One way to look at it is to consider the role of software ownership in the decision making process. Generally speaking, most software is brought upfront, with an annual fee for support and licencing. Sometimes, other hardware or applications are also needed to run the program effectively, and upgrades may also be required down the line. This means that something that began as a once-off £5,000 investment ends up being closer to a £10,000 initial investment, with annual costs of £2,000 during the life-span of the software program. This isn’t even including the added costs of employment that may be required. Overall, this results in much uncertainty when it comes to traditional software ownership – especially for companies without the IT skills to understand how the software operates.
The Internet has changed the way that companies source software, and has also affected the price of software too. With faster broadband and reduced hardware costs, software is becoming accessible to anyone and everyone.
Why Hosted Software Offers a More Effective Solution
If you had to compare the software ownership implications to a hosted software option, the advantages soon become clear. Rather than continuous costs running up, the hosted option instead offers a flat rate of £1,750 per year on an on-going basis. In addition to this, all hardware costs and upgrades are also included in this set rate, and the entire process is managed externally by the software provider. This means no surprise price hikes a few years down the line as well as many other benefits.
If this seems too good to be true, then consider this – when it comes to infrastructure, the hosted option works very simply by holding a number of copies of the software on the same server. This means that the cost of the software is spread out between all who use this software. This also ensures that the product is being used far more effectively. With similar versions and software configuration being accessed by all customers, all maintenance and updates are also handled easily as these are done across the board – ensuring a lower cost for each user. Even better, the hosted option ensures that the most important applications are used rather than adding more features that are only used by a small percentage of customers. This simplifies things and cuts costs in terms of development and maintenance of software – something that has a ripple effect across a larger user base.
All in all, hosted software offers better usability and better pricing, with a number of additional benefits including the ability to keep documents and information in a different, often safe location. This is explored more in our Hosted Software and Business Continuity Contingency article.