Time for time-share software?

By James A Cooke -- Logistics Management, 12/1/1998

It used to be that the term time share referred to a resort condo. No longer. The latest buzzword in the business software industry, "time share" now refers to the rental of software applications over the Internet or via a dedicated phone line.

For logistics managers at small or medium-sized companies, access to time-share software offers the opportunity to use state-of-the-art applications at a fraction of the retail price. This is no small matter. Not only can license fees for logistics software programs run into the thousands of dollars, but there usually are additional costs for software integration as well. Companies often have to hire systems integrators to write custom-built interfaces to enable their existing systems to exchange data with the new distribution software. Consider the average cost of a Warehouse Management System (WMS) package, a popular type of software used to oversee warehouse operations: A software license, installation, and the training of workers to use the WMS package can easily exceed $1 million in today's market.

No wonder software companies have to look at ways to make their products affordable. Fortunately, telecommunications companies have begun upgrading the network underlying the Internet to allow higher communication speeds, which makes the real-time rental of software feasible.

Leading the way in this new software-distribution approach is the MK Group, a unit of Computer Associates International based in Islandia, N.Y. MK Group will begin renting its manufacturing and distribution software over the Internet and via a dial-up phone network through a new service called "MK Everywhere."

MK Group Vice President James Patrick says his company will require users to pay a fee up front and then rent the software on a monthly basis. Specifically, MK Everywhere customers will pay a one-time $99,000 implementation fee and a $25,000 license fee. Then they will pay a monthly fee of $625 per individual user. "It's a fixed sum for IT costs," says MK Group spokesman Mike Finnegan, noting that the price includes upgrades and support.

Besides making the technology more affordable, software rental provides another benefit to small companies: It gives them access to programs without having to pay for expensive IT talent to run their in-house computer systems. Users won't need IT support because the software itself will be maintained on an MK server. "It's great for smaller companies that don't have an IT staff," says Finnegan.

Many industry experts believe that even the big players in the business software market--the makers of Enterprise Resource Planning (ERP) systems--eventually will rent out their very expensive applications via the Internet. In fact, Patrick expects his company soon will face stiff competition in the time-share market. "Every software vendor out there will announce this," he says. "Because if you don't do this, you're out of business."

Although outright ownership of distribution software still makes sense for companies with large in-house IT staffs, time-sharing of software might finally give smaller companies the electronic capabilities they need to provide world-class distribution service. Given that executing a supply chain strategy may be impossible without the right software, the rental option could allow smaller companies the chance to compete successfully in the global economy of the 21st century.