Web Applications is not relevant for Enterprises

There has been a lot of buzz lately about "Google Apps for your domain". It is said this will move Google into the enterprise world, and Microsoft will soon lose its dominance.

But, it only shows that a lot of people and news outlets knows absolutely nothing about the enterprise world. Google Apps is not relevant for enterprises, nor is most other web applications that has been made within the past years.

Legal Issues with Web Applications

Entering the enterprise world is not about features or technology. It is primarily about legal responsibilities.

Every company has a legal requirement to safely store all essential documents. On top of that everything that has something to do with your cash flow, suppliers, partners and customers can be used in a court of law.

You need to be 100% sure that your data is protected, always available and can never be tampered with. This very thing can mean the difference between success and failure in a dispute.

But, few web companies accepts this responsibility. This is what Google GMail's Terms of use states:

You understand and agree that the Service is provided on an AS IS and AS AVAILABLE basis. Google disclaims all responsibility and liability for the availability, timeliness, security or reliability of the Service. Google also reserves the right to modify, suspend or discontinue the Service with or without notice at any time and without any liability to you.
- Google's Terms of Use

And, the terms of use from 37Signals:

You expressly understand and agree that 37signals shall not be liable for any direct, indirect, incidental, special, consequential or exemplary damages, including but not limited to, damages for loss of profits, goodwill, use, data or other intangible losses (even if 37signals has been advised of the possibility of such damages)
- 37Signal's Terms of Use

They can do everything they want, they are not responsible for anything, and they can and will change or delete your data if they feel like it. There is nothing you can do about it.

This lack of responsibility is bad enough for private individuals, but for enterprises it is an unacceptable situation.

An external partner (like Google) have to be legally responsible before an enterprise can use their services. They have to be legally responsible for making the system secure, backup of the data, its availability, that it is never tampered with and not accessed by anyone not unauthorized to do so.

Because of these issues enterprises will keep installing their own in-house mail servers, use desktop version of Outlook, Word, and Excel. They are not going to use online project management tools, apart from those where the actual data is stored in-house.

Web applications are not relevant to enterprises before the companies behind them accepts their legal responsibilities.

Other issues preventing success with enterprises

While the legal issues are a definite show-stopper, there are a lot of other smaller issues that is equally important.

Privacy laws

Some countries have strict privacy laws preventing enterprises from using web applications (or third party in general). Specifically the problems are about secure data transfers/storage and that you may not share personal data with third parties.
Something like this can be problematic:

You understand that the technical processing and transmission of the Service, including your Content, may be transferred unencrypted...
- 37Signal's Terms of Use

IT-support

Contrary to what many people believe, the highest cost of IT (in enterprises) is not the hardware, the software, the licensing fees, or monthly fees to a web application - it is IT-support. Because of this, enterprises have a strong desire to be in control of any updates.

Hardly any update are added automatically, often enterprises will skip one or more versions - or do not upgrade at all for several years. This is the very reason why so many people still use Windows 2000.

A web application's inherit "auto-update" behavior means that enterprises cannot predict the support costs. E.g. 37Signals modification term (below) prevents their products from being used in any professional situation.

37signals reserves the right at any time and from time to time to modify or discontinue, temporarily or permanently, the Service (or any part thereof) with or without notice.
- 37Signal's Terms of Use

Support availability

Enterprises also needs to get problems fixed. They require stability and reliability. A simply things as having 1000 people sit and wait for some problem to be fixed can be a costly experience.

1 hour waiting time (for 1000 people) equals $50,000 in lost revenue (for internal operations) and between $150,000-$200,000 for external operations.

It is very common that enterprises require support agreements. Usually containing:

Maximum waiting time (e.g. support call has to be answered within 1 minute, and problems has to be fixed within the hour)
Uptime guarantees
24 hour support (common in the US, but not in Europe)
Available support channels
Etc.

Paranoia

A lot of large companies protect their data with immense intensity. They fear that upcoming products, internal problems, strategies, clients projects etc. may come into the hands of their competitors. I have seen many examples of enterprises discarding otherwise great products because they could not trust them.

Most enterprise even got several layers of protection between the outside world and internal data. They are not going expose data to a server that has direct access to the internet.

For now, web applications has little relevance to enterprises. You cannot base your company on unreliable terms.

Google reserves the right to refuse service to anyone at any time without notice for any reason.
- Google's Terms of Use

Comments

Peter Flynn - Sep. 9, 2006

I disagree with your point about the Terms of Use. Most installed desktop software has similar limitations in its licensing terms. For example, MS Word has the following clause:

"Except for any refund elected by Microsoft, YOU ARE NOT ENTITLED TO ANY DAMAGES, INCLUDING BUT NOT LIMITED TO CONSEQUENTIAL DAMAGES, if the Software does not meet Microsoft's Limited Warranty, and, to the maximum extent allowed by applicable law, even if any remedy fails of its essential purpose."

That's basically just as bad as your excerpts above. It's been a long time since ANY software company has accepted legal responsibility for problems.

It seems to me that paranoia is probably the biggest factor today. Will the web service go out of business? What if their servers are down too often? Is my data really safe? Etc.

Thomas Baekdal - Sep. 10, 2006

Peter,

There is a huge difference between desktop applications and web applications' "terms of use" - not in the words, but what you can do about it.

If you have a problem with a desktop application, you have the option of taking matters into your own hands. The data is under your control, and you can attempt to fix it (reinstall, open the data in another applications etc.). You have control over backup.

Sure, sometimes you are in a situation where a file is corrupted, but it is on a file-to-file basis.

Enterprises always appoints someone to be responsible for the safety of your data (usually IT). These people will then make sure that the data is safe in case of legal disputes, take care of IT-support etc.

You do not have these options with web applications, because you are not in control of your data. This why it is important for web applications to take on this responsibility.

Web applications is not just another form of software. For enterprises it is outsourcing.

evbart - Sep. 28, 2006

Where do companies like salesforce.com and sugarcrm stack up in this issue?

Will these webapp companies have to release a license that provides more security, more up-time, and even syncing to local storage, before they can even consider the enterprise space?

Thomas Baekdal - Sep. 28, 2006

Evbart, that is a very good question.

For SugarCRM it is easy, because they offer an enterprise version. This edition is not hosted by SugarCRM, and thus solves the enterprise issues.

As for SalesForce, then they solve this by doing several things.

First of all, they allow enterprises to backup the data locally, so that if SalesForce where to disappear, the enterprises will not (theoretically) lose any data.
They provide an "Enterprise" edition that allows you to be control (mostly)
They have very strict privacy policy.
They have superior security - often better or as good as the enterprises themselves.
SalesForce does not claim ownership to any of your data.
In case of a dispute, SalesForce will make your data available to you for 30 days (alt=hough this is a bit blurry when it comes to non-payments).

SalesForce also states that it makes no warranties or guarantees in regards to availability, security, reliability etc.

This makes SalesForce a serious provider. In fact the only problem you might have is the risk of loss of connectivity. If that happens you got a problem. But, since the data can be stored locally and that you can assign administrators to it, you do not have a problem with any of the other issues. When the connection is restored you can simply move on - even if SalesForce where to accidently delete all your data.