Applications - Rent or Buy?

1999-04-14

The chances are you have not heard of Corio, however you will have heard of British Telecom. These companies are linked by a common objective - to provide application services to customers over the Internet. Corio, a Californian firm, is linking with Peoplesoft; BT has struck a deal with SAP. There will be many providers of such services, making enterprise scale applications such as these available to customers that could not otherwise afford them. Smaller scale applications can also be rented out over the Web – for example Yahoo already provides email and scheduling and is reported to be considering providing word processing facilities.

The advantages of application outsourcing are numerous – for example,  capital costs and administration overheads are enormously reduced and customers can take advantage of the newest releases of applications. Downsides are yet to be fully appreciated as this market is still in its inception, but are likely to include problems of interoperability between local and remote applications, issues with service level maintenance and difficulties in changing suppliers. Just as with outsourcing of IS departments a few years ago, perhaps the biggest problems will stem from the legal wrangles which will inevitably arise as customers find the service is not all it was hoped for. Application outsourcing, whilst appearing extremely attractive, should be treated with the utmost caution until its benefits and costs have been fully appraised.

(First published 14 April 1999)