Web-hosted office suites are here to stay

Adison & Partners is a small yet emblematic part of a major shift in how office software is sold and used.

No, Adison & Partners isn't a Web 2.0 Silicon Valley startup. It's an eight-person executive recruitment company in New Jersey. Its founder and managing partner Jim DiPietropolo doesn't know what a "wiki" is.

This he knows: choosing a Web-hosted suite of communication and collaboration applications has greatly benefitted his business.

Like Adison & Partners, thousands of organizations, large and small, are researching and implementing hosted office suites as alternatives to pricier, traditional options, like Microsoft Office, designed to live in PC hard drives.

Sure, IT buyers, whether chief information officers at large companies, small-business owners, or self-employed individuals, must study the options carefully and ask hard questions about these software-as-a-service (SaaS), on-demand suites.

But while "fools rush in" mistakes are bad, an even worse decision regarding the SaaS model is ignoring it. That's particularly true for large organizations.

"Now is the time to definitely have advanced technology folks and strategy people, the ones who look a year or two ahead, to look at this stuff and stay abreast of it, even if the time isn't yet right to purchase," says Burton Group analyst Guy Creese. "A huge mistake would be to look at the offerings today, say they're immature and then not pay any attention."

The offerings are uneven, with some suites strong in webmail, while others focus on productivity applications like word processing and spreadsheets. Many key architecture, business, and technology questions await answers.

But the SaaS model for these office suites is here to stay. Many big vendors are either openly embracing or likely to enter this market.

Google is committed with its Google Apps suite, as is Cisco Systems with the WebEx WebOffice product. Salesforce.com certainly could stake out a strong position quickly, applying its experience in the CRM (customer relationship management) SaaS market. Several smaller vendors have strong offerings, including Zoho and Zimbra.

Then there is Microsoft, whose inability or unwillingness to come out with a hosted suite comparable to Google Apps many find befuddling. Microsoft Office is the dominant productivity suite in the packaged software.

That may be the problem. Many wonder if Microsoft is struggling with how to develop a hosted version of Office without cannibalizing the suite's packaged software business.

"A challenge for Microsoft is to figure out how to get people to buy the next version of Office if there is also an on-demand version," says Rebecca Wettemann, an analyst with Nucleus Research.

Another reason for Microsoft's perceived deer-in-the-headlights reaction: "They're not innovating the way they were 10 years ago," Wettemann says.