New Software: Rent vs. Buy?

The “dinosaur days” of purchasing traditional boxed software are being replaced by a new era of purchasing, installing and updating new software and upgrades directly off the Internet. Downloading and installing software on your company computers can become a redundant, time-consuming task. You may find yourself using complex software tools to install the latest software products, spending precious time that can be better used elsewhere. Even a basic word processing program can take you 15 to 20 minutes to install on each computer, while something more complex like an enterprise resource planning (ERP) or customer relations management (CRM) program can take you anywhere from several days to weeks to fully install company-wide. The problems only increase if you find out, belatedly, that you have software conflicts with other programs and — bam! — your computers crash.
And then, almost as soon as you are done installing all the necessary applications (or at least, that’s how it feels), it’s time for an upgrade! Vendors upgrade their software on a regular basis and issue patches to fix glitches or security holes when needed. You must download the updated software (or wait for the CD or diskette) and install it onto your computer. Imagine if 20 of your computers need to be updated. Prepare to spend the night in the office, because you won’t have the time to do it during normal working hours. And if you choose to have a consultant install the software, you might save time and aggravation, but at a cost.  

There is an alternative: Renting online applications, better known as hosted applications. What is a hosted application? The online banking services offered by your bank, as well as free e-mail services like Microsoft’s Hotmail, are hosted applications — applications that are not installed on your computer but that you access via the Internet from an ASP (application service provider). Other hosted applications include NetSuite, Salesforce.com and Quicken Online. Intuit offers several versions of QuickBooks including a hosted application. And you can use Microsoft Outlook with or without Exchange, which could be hosted. With Exchange, you could access your Microsoft Outlook data from almost any computer connected to the Internet (and on the flip side, if your Internet connection goes down, you have no access to your data). 

FINDING A REPUTABLE ASP It is crucial to ensure that your application service provider (ASP) is reputable — you don’t want your data (your business!) to be serviced by an ASP that will be out of business in six months, taking your data with it. Unfortunately there is no Better Business Bureau of application service providers, but here are a few things to consider whenchoosing one:

Check to see how long they have been in business (it shouldbe at least three to five years).

What is the company that supports the ASP? (For example, Oracle is a very stable company that offers hosted applications.)

Who are their customers? People in your industry, or other industries you are familiar with?

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