It’s been a busy few weeks for the big technology companies. On October 1, Adobe Systems announced an agreement to buy Virtual Ubiquity, a company that has created a web-based word processor built on Adobe’s next generation software development platform. One day earlier, Microsoft outlined its plans for Microsoft Office Live Workspace, a service that will combine Microsoft Office and web capabilitiesso that documents can be shared online. Recently,Google introduced a technology called “Gears” that allows developers to create web applications that can also work offline. The common thread between the recent moves of these technology titans: Each company is placing a bet on a new vision of software’s future, one which combines the features of web-based applications with desktop software to create a hybrid model that may offer the best of both worlds.
Even smaller companies are introducing products to support this hybrid model that bridges the divide between web and desktop software. For instance, the Mozilla Foundation — the organization behind the Firefox browser (a major rival of Microsoft’s Internet Explorer) — said on October 25 that it was launching an initiative called “Prism.” According to Mozilla, a non-profit group that develops open source software, Prism allows web applications to run outside the browser and behave more like desktop software.
“Over time, the current dominance of desktop-only applications, or even predominantly desktop-based apps, will decrease,” predicts Wharton information and operations management professor Kartik Hosanagar. “But I don’t expect desktop apps to completely disappear anytime soon. I see the future as a hybrid with basic apps on the desktop and several apps being downloaded over the web.”
The Hybrid Software Future: A Realistic Choice
Experts at Wharton decline to put a timeline on this software evolution. Google’s vision of purely web-based, hosted software isn’t likely to play out for years. For that reason, the hybrid software model looks appealing to many.
According to Hosanagar, this model is likely to develop in two phases. “In the first phase, applications will provide essentially the same features as a desktop application, only you will now be able to access them from anywhere. Current web-based apps are good examples of this.” For example, Yahoo Mail looks a lot like Microsoft’s Outlook email program. Google Docs and Adobe’s Buzzword mimic Microsoft Word and add perks like the ability to access your documents from any computer.
In this phase, occurring today, Hosanagar says desktop applications will offer more features than web-based software, but over time that advantage will erode.
In the second phase of this hybrid model, web applications and desktop software will co-mingle, says Hosanagar. “What’s likely to be more exciting is the next phase, where these web-based applications can interact and share data with each other and become platforms [that developers can use to build more software]. Facebook has already become one such platform, as has Salesforce.com on the enterprise side. In the next phase, far more interesting things will happen as these web apps start talking to each other.”
Clemons notes that another critical factor for the evolution of software will be mobile applications. “My bet is that desktop software will be used for home operations, and webtop software will be used for mobile applications,” says Clemons. The key will be synchronizing desktop and web software wherever a person goes. “None of us has a good idea what these mobile applications will be, but they may provide real value.”
Show Me the Money
No matter how software’s hybrid future develops, there is no shortage of possible business models, says Whitehouse. But, as with the issue of which architecture is best, which approach to generating revenue will be the most successful in the future remains to be seen.
Google is generating considerable revenue selling advertising on its free web-based applications. In addition, Google Apps Premier Edition is available for an annual per-user fee. Adobe intends to profit from selling software development tools used to create both web-based and hybrid applications. Microsoft hopes to blend desktop software licensing and subscriptions with advertising. “There doesn’t seem to be any lack of options regarding monetization schemes,” notes Whitehouse.
Following Google’s success, many software vendors are pursuing advertising for their current generation of web-based services. On October 24, Microsoft spent $240 million for a 1.6% stake in social networking site Facebook. The move gives Microsoft a high-profile customer on its adCenter advertising network. Microsoft also paid $6 billion for online advertising firm aQuantive in May. The plan: Become a large advertising player so it can monetize its web sites and online services to protect against potential future trends away from its traditional revenue streams of PC operating systems and desktop software.
“We’re aiming to become one of the major players in the online advertising space, and we are pleased by the progress we are making in putting the building blocks in place,” said Microsoft chief financial officer Christopher Liddell on October 25 after the company reported fiscal first quarter earnings.
Google is advertising throughout its web-based applications, but offers this software ad-free for a fee. In addition to its advertising-supportededition of Google Docs, Google also provides a Premier Edition that offers more storage and support for $50 a year per user. Other companies, such as Salesforce.com, rely primarily on subscription-based revenue. From Knowledge@Wharton