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 / Winter 2007 / Issue 49(originally published by Booz & Company)


Web-Based Apps: A Strategic View

The advantages and disadvantages of cloud computing for corporations.

On the whole, today’s chief information officers (CIOs) in companies large and small are anything but enthusi­astic when asked their opinion of the ubiquitous client/server networks they manage. The client computers, whether desktop or notebook, are costly to buy and maintain; given the pace of technological change, they also need to be re­placed every two or three years. The servers and the networks themselves are cumbersome, very breakable, expensive, and difficult to control. Worst of all, the personal productivity applications loaded on ever more powerful clients so employees can actually get their work done — a software sector long dominated by Microsoft — require that companies spend a king’s ransom not just to purchase them, but to train users. And these same users must be retrained every time vendors update the programs and add yet more features.

Considering the cost and complexity of these networks, it’s no surprise that CIOs have lusted after the dream of a so-called thin-client computing environment, in which programs reside solely on servers and are doled out to cut-rate, slimmed-down, “dumb” workstations as the users need them. A minimalist version of this computing concept came into being with the invention of the Internet browser, which made it possible for individual client machines to access Web-based software — variously known as ASP (application service pro­vider), software as a service, and now cloud computing. A good example is, which provides salespeople with data management tools that can be accessed from anywhere via the Web.

But applications like Salesforce are geared toward a limited customer base. And until recently, no one had successfully offered the one thing that would make thin-client computing a widespread reality: Web-based personal productivity applications — the word processors, spreadsheets, and presentation software on which every knowledge worker has come to depend.

Finally, we have the advent of offerings such as Zoho office suite, ThinkFree Office, and, most no­tably, Google Apps. Even Microsoft has entered the arena, with a Web-based version of Microsoft Works, though the software giant is still shying away from offering its big moneymakers, Word and Excel, online. Although these applications aren’t yet quite ready for prime time, especially in computing environments on the scale of large corporations, their strategic implications, especially in an age of vastly increased mobility and the rise of the globally integrated corporation, are profound.

The virtues of Web-based productivity applications are many and compelling. Most obvious — and an issue dear to the heart of every CIO — is the cost relative to purchasing a full Microsoft Office package for every employee who needs such tools. Office costs US$408 per user, which includes three years of maintenance. Every additional year of maintenance costs $74. So a company with, say, 19,000 employees needing Office to do their jobs would have to pony up $17.6 million over 10 years for the software. If only 20 percent of these workers were given Office and the rest were provided with a free Web-based application suite — whose maintenance and upgrading is the provider’s problem, not the CIO’s — the total 10-year cost would come to just $3.5 million, a savings of $14.1 million. Few organizations can afford to ignore numbers like those.

The financial advantages in­crease even more if one takes into account the cost savings achieved by shifting the storage burden from clients or the network to the vendor’s data centers — and no longer incurring associated costs such as regular backup of employees’ hard drives. And since documents and spreadsheets stored on the Web can be accessed by anyone with the appropriate privileges, the burden imposed on corporate networks to manage the exchange of countless numbers of files is eliminated, as are the risks of contamination by e-mail viruses — another large cost savings.

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