Denver-based Madison Capital Management used to have a hard time tracking internal projects with software installed on their company computers.
“It was quite a mess,” said Russell Schroeder, Madison’s vice president of software development. “We had developers working on one version of the document; managers were looking at something different.”
A year ago, the investment management firm began subscribing to a software service that let employees chart and update work progress in one central location, and securely access project information anywhere in the world using an Internet connection.
That move by Madison Capital is part of the “software as a service” trend, which allows on-demand access to computer applications provided by outside vendors. Madison uses a product from Rally Software Development Corp., a Boulder-based company that has a program to manage large projects.
“Now, there’s never a question of what we’re working on because there’s only one version,” Schroeder said.
At the very basic level, Web-based e-mail services such as Yahoo Mail and Google’s GMail are examples of software-as-a-service applications. Google also offers Web-based word processing, spreadsheet, calendar and contact programs under free packages called “Google Docs and Spreadsheets” and “Google Apps for your Domain,” which are beginning to compete against Microsoft’s suite of Office products.
While companies aren’t ripping out millions of dollars worth of hardware and software just yet, the migration to the software-as-a-service model is happening.
By 2011, 25 percent of all new business software will be delivered as a service from a website, predicts Gartner Inc., a Stamford, Conn.-based publisher of information technology research. Gartner estimates that 5 percent of business software was delivered in this fashion in 2005.
“It says a lot about a shifting, increasing interest in (software-as-a-service),” said Benoit Lheureux, a research director at Gartner. “Companies see value in not having to buy software and getting it on an on-demand basis.”
Google spokeswoman Courtney Hohne said her company’s GMail service can be customized and used across an organization. She said a lot of organizations don’t want the hassle of managing e-mail.
“It’s easier to rely on us,” she said. “Users get our product and the administration and business people can focus on technologies that are more strategic.”
San Francisco-based Salesforce.com leads the business-to-business software-as-a service industry, offering Web-based customer relationship management services to more than 550,000 users at 27,100 companies worldwide. The company, founded by a former Oracle Corp. executive in 1999, went public in 2004 and is valued at $4.4 billion.
At the same time, on-demand applications are not limited to small, startup companies. Technology giants such as IBM, HP, Oracle and Microsoft have implemented some on-demand services. For example, IBM offers customized customer relationship management software for retailers, according to spokesman Lon Levitan.
Companies offering this on-demand method of software delivery with a subscription pricing model say it offers fewer financial and technical risks for businesses and offers better customer support.
“You can try it on one team with a limited number of users and not incur all of those setup costs,” said Ryan Martens, Rally’s founder and president. “Software is moving away from being a product industry. You don’t need to put it on your machine.”
At Rally Software, 55 employees are responsible for applications that reach more than 5,000 users. The company has updated its flagship product every two months since its introduction in 2004.
“You get a lot closer to the customer,” Martens said. “You release more often in smaller fashion so the changes aren’t so apparent. In the world of (software-as-a-service), when you add features, you don’t break the way you’re using the product today.”
Schroeder, of Madison Capital, tested Rally’s offering with five of his eight software developers. After a couple of months the entire team was using the service.
“The amount of money we would spend on a (software-as-a-service) model for a year would equal the hardware implementation of an internally hosted system,” he said.
Web-conferencing services, such as the ones offered by Denver-based ReadyTalk, are also considered providers of software-on-demand.
There was debate on whether the company should go that route or take a more traditional, hardware installation approach, said ReadyTalk founder and CEO Dan King.
The on-demand solution was advantageous because it minimized risks for customers and made it easier for ReadyTalk to provide updates for users.
“It helps us standardize support; we’re able to deploy new features to products based on feedback, with no interruption to users,” King said. “They don’t have to invest in the hardware and licensing costs in order to use it.”
Staff writer Kimberly S. Johnson can be reached at 303-954-1088 or kjohnson@denverpost.com.
