The idea of renting business software looks good on paper, especially for small companies. By running on a remote machine at an Internet service provider, so-called rentware eliminates the hassle of upgrades, troubleshooting, and installations.
So why aren't more people buying into it?
Last fall, the research firm IDC in Framingham, Massachusetts, predicted that the market for rentable business software -- also known as teamware -- would skyrocket to US$400 million by the year 2001.
"We now expect that figure to be high," said IDC analyst Mark Lebitt. "The market is maturing slower than we anticipated."
Telecommunications companies and ISPs have been slow to adopt programs that would give customers a chance to rent groupware from Lotus Development -- and more recently, Netscape -- on a monthly basis.
Oracle is the latest big-name developer to offer rentware. Last week, the company announced it would let users lease an Oracle8 database over the Web.
Lotus Development began leasing a version of their Notes software, called Lotus Instant Teamroom, to small business customers a little over a year ago. Since then, only a handful of network service providers have signed on to offer Lotus groupware for rent, which lets customers use a private slice of the Internet for collaboration and messaging for roughly $15 per month.
Of the five NSPs that signed on to offer the service, only one, Houston-based Interliant, is in the United States.
Another ISP, Netcom Online Communication Services, no longer offers Lotus rentware for small businesses, although it plans to launch a new software rental service this fall based on Netscape�s SuiteSpot intranet hosting software.
To generate more interest, Lotus initiated a second program in April called Domino Instant Host that encourages telcos and ISPs to develop their own vertical applications for rent using Lotus� Domino Web server as the foundation. For example, an ISP with a service for searching for the best deals on new cars could create an application that would refer users to auto dealers.
Oracle hasn't released details on when or how it plans to make available its database leasing program. But some analysts have questioned the program's appeal for traditional database customers.
"My guess is that renting or leasing databases would raise concerns about where potentially sensitive data is being stored," said Ron Rappaport, analyst with Zona Research in Redwood City, California. "If something goes wrong, you�re very much at the mercy of your ISP."
Rappaport added that databases, which often require a high degree of customization, may not be as well-suited for rental as groupware or even games.
ISPs insist that demand for rentable applications is on the rise. SaskTel Advanced Interactive Solutions says more than 150 Canadian small businesses have signed up for the intranet hosting services that the Saskatchewan telco began offering in June.
Based on Netscape�s SuiteSpot, AIS�s QuantumLynx Office service provides customers with services such as email, groupware, and videoconferencing.
AIS won�t name its QuantumLynx Office subscribers, but customers are said to range from small, three-person home-office operations to firms with 500 employees. AIS plans to offer additional services in the fourth quarter that would let customers conduct secure transactions over the Web.
Based on customer feedback, the telco is also considering whether to add more general business productivity applications to its services menu, said general manager Shelly Smith.
"We�re still working out whether we could offer business productivity applications on a [more inexpensive] rental basis," Smith said. For example, AIS -- which expects rentable applications to eventually account for 10 to 20 percent of its total revenue -- is negotiating with a Canadian software developer to rent its tax preparation application to AIS customers.
Most makers of business productivity applications aren�t likely to be receptive to the idea, however.
"Renting [general purpose business] applications is just another way of paying for software over time," said Steve Brand, general manager for Lotus� small business solutions division in Cambridge, Massachusetts. "What we�re really trying to do is give customers a more hassle-free way to deploy more complex applications."
