Web-based software sells well, especially in comparison to desktop software, because it's easy to buy. You might think that people decide to buy something, and then buy it, as two separate steps. That's what I thought before Viaweb, to the extent I thought about the question at all. In fact the second step can propagate back into the first: if something is hard to buy, people will change their mind about whether they wanted it. And vice versa: you'll sell more of something when it's easy to buy. I buy more books because Amazon exists. Web-based software is just about the easiest thing in the world to buy, especially if you have just done an online demo. Users should not have to do much more than enter a credit card number. (Make them do more at your peril.)
Sometimes Web-based software is offered through ISPs acting as resellers. This is a bad idea. You have to be administering the servers, because you need to be constantly improving both hardware and software. If you give up direct control of the servers, you give up most of the advantages of developing Web-based applications.
Several of our competitors shot themselves in the foot this way-- usually, I think, because they were overrun by suits who were excited about this huge potential channel, and didn't realize that it would ruin the product they hoped to sell through it. Selling Web-based software through ISPs is like selling sushi through vending machines.
Who will the customers be? At Viaweb they were initially individuals and smaller companies, and I think this will be the rule with Web-based applications. These are the users who are ready to try new things, partly because they're more flexible, and partly because they want the lower costs of new technology.
Web-based applications will often be the best thing for big companies too (though they'll be slow to realize it). The best intranet is the Internet. If a company uses true Web-based applications, the software will work better, the servers will be better administered, and employees will have access to the system from anywhere.
The argument against this approach usually hinges on security: if access is easier for employees, it will be for bad guys too. Some larger merchants were reluctant to use Viaweb because they thought customers' credit card information would be safer on their own servers. It was not easy to make this point diplomatically, but in fact the data was almost certainly safer in our hands than theirs. Who can hire better people to manage security, a technology startup whose whole business is running servers, or a clothing retailer? Not only did we have better people worrying about security, we worried more about it. If someone broke into the clothing retailer's servers, it would affect at most one merchant, could probably be hushed up, and in the worst case might get one person fired. If someone broke into ours, it could affect thousands of merchants, would probably end up as news on CNet, and could put us out of business.
If you want to keep your money safe, do you keep it under your mattress at home, or put it in a bank? This argument applies to every aspect of server administration: not just security, but uptime, bandwidth, load management, backups, etc. Our existence depended on doing these things right. Server problems were the big no-no for us, like a dangerous toy would be for a toy maker, or a salmonella outbreak for a food processor.
A big company that uses Web-based applications is to that extent outsourcing IT. Drastic as it sounds, I think this is generally a good idea. Companies are likely to get better service this way than they would from in-house system administrators. System administrators can become cranky and unresponsive because they're not directly exposed to competitive pressure: a salesman has to deal with customers, and a developer has to deal with competitors' software, but a system administrator, like an old bachelor, has few external forces to keep him in line. [10] At Viaweb we had external forces in plenty to keep us in line. The people calling us were customers, not just co-workers. If a server got wedged, we jumped; just thinking about it gives me a jolt of adrenaline, years later.
So Web-based applications will ordinarily be the right answer for big companies too. They will be the last to realize it, however, just as they were with desktop computers. And partly for the same reason: it will be worth a lot of money to convince big companies that they need something more expensive.
There is always a tendency for rich customers to buy expensive solutions, even when cheap solutions are better, because the people offering expensive solutions can spend more to sell them. At Viaweb we were always up against this. We lost several high-end merchants to Web consulting firms who convinced them they'd be better off if they paid half a million dollars for a custom-made online store on their own server. They were, as a rule, not better off, as more than one discovered when Christmas shopping season came around and loads rose on their server. Viaweb was a lot more sophisticated than what most of these merchants got, but we couldn't afford to tell them. At $300 a month, we couldn't afford to send a team of well-dressed and authoritative-sounding people to make presentations to customers.
A large part of what big companies pay extra for is the cost of selling expensive things to them. (If the Defense Department pays a thousand dollars for toilet seats, it's partly because it costs a lot to sell toilet seats for a thousand dollars.) And this is one reason intranet software will continue to thrive, even though it is probably a bad idea. It's simply more expensive. There is nothing you can do about this conundrum, so the best plan is to go for the smaller customers first. The rest will come in time.
Running software on the server is nothing new. In fact it's the old modeclass="underline" mainframe applications are all server-based. If server-based software is such a good idea, why did it lose last time? Why did desktop computers eclipse mainframes?
At first desktop computers didn't look like much of a threat. The first users were all hackers-- or hobbyists, as they were called then. They liked microcomputers because they were cheap. For the first time, you could have your own computer. The phrase "personal computer" is part of the language now, but when it was first used it had a deliberately audacious sound, like the phrase "personal satellite" would today.
Why did desktop computers take over? I think it was because they had better software. And I think the reason microcomputer software was better was that it could be written by small companies.
I don't think many people realize how fragile and tentative startups are in the earliest stage. Many startups begin almost by accident-- as a couple guys, either with day jobs or in school, writing a prototype of something that might, if it looks promising, turn into a company. At this larval stage, any significant obstacle will stop the startup dead in its tracks. Writing mainframe software required too much commitment up front. Development machines were expensive, and because the customers would be big companies, you'd need an impressive-looking sales force to sell it to them. Starting a startup to write mainframe software would be a much more serious undertaking than just hacking something together on your Apple II in the evenings. And so you didn't get a lot of startups writing mainframe applications.
The arrival of desktop computers inspired a lot of new software, because writing applications for them seemed an attainable goal to larval startups. Development was cheap, and the customers would be individual people that you could reach through computer stores or even by mail-order.