SAN MATEO (11-11-95) - As new component technology expands the menu of software options, some forward-looking IS managers and vendors are wondering what's the best component software model: a prix fixe menu or a al carte?
The answer: No one knows yet. What many observers do agree on is that the day is soon coming when corporate users will be able to build applications from a wide variety of interlocking components.
Lotus Development Corp. thinks so. The company hopes to topple the application suite cart in 1996 by repackaging its core desktop application product, SmartSuite, as a series of OLE custom controls (OCXes) next year. Coming from one of the leading software development companies, the move validates a new model that many have theorized about for some time.
If Lotus is right that components are the future of the software industry, IS organizations will be more free to mix and match application components from different kinds of applications, from different vendors, and perhaps even from different OS platforms. For corporate developers, components will also mean a reduction in development time, because generic capabilities, such as the calculation engine in Lotus 1-2-3, can be embedded directly in a client/server financial application.
This flexibility may appeal to corporate customers, but it turns the simplified site license model, in which users buy in bulk from a single vendor, on its head.
"If everything is customized, you have to find some way to know who to pay at the end of the month," says Phyllis Koch, a technology consultant at Ryder System Inc., in Miami. "You would really need both electronic software distribution and electronic asset management."
Koch is intrigued by the promise of components but is waiting to hear a compelling argument that component-based applications will bring cost savings.
Many ISVs are looking to the Internet to provide just that. But the pricing and distribution ramifications of mixing components and the Internet are not yet clear.
"What happens when you use the [World Wide] Web as an application server and you end up with a lightweight desktop [running only components downloaded from the Internet]? That requires a whole new model," says Adrian Bowles, vice president of Giga Information Group, in Cambridge, Mass., and a former full-time consultant in object-oriented technologies. "Everybody agrees we need a strategy, but no one has one."
The site license model has worked well for software vendors with the clout and the gross margins to dominate their industries, such as Microsoft Corp., and most components today follow the shrink-wrapped formula: one set of code for one user at one price.
But a software industry built around specialized components will need a new pricing and distribution model that will let corporate users leverage code already written and avoid buying features that never get used -- but also keep software vendors in business.
Components du jour
Some industry analysts say today's component market is minuscule compared with its potential. Revenue generated by component sales is expected to balloon from $100 million in worldwide sales this year to $1.65 billion by 2000, according to Dream IT Inc., a research company in Boulder, Colo.
Microsoft's OLE 2.0 is the cornerstone of the current component industry, providing a standard for third-party custom controls and a framework -- Microsoft Office and Visual Basic -- to plug them in to.
The OpenDoc initiative from IBM, Apple Computer Inc., and Component Integration Labs Inc. is just this month seeing the light of day and is compliant with the current leading object model in the Unix world, the Common Object Request Broker Architecture.
And now Sun Microsystems Inc. and Oracle Corp. are joining forces to promote yet another potential standard, the Java object-oriented language for creating Web apps.
But none of the object standard camps has filled in all the details for selling, distributing, managing, administering, and supporting component applications.
What these vendors are instead focusing on now is explaining the benefits of component technology.
The main point is well established: Components mean that developers and corporate users don't have to reinvent functionality that already exists. Mix-and-match components also mean users can buy expertise from highly specialized developers -- such as mapping vendors for the petroleum industry -- without having to change their software infrastructure to match.
With generic productivity software, end-users can use components -- anything from a simplified text editor to a complex stock fund calculator -- as appendages to larger container applications such as Lotus Notes or WordPro, says Jeffrey Beir, senior vice president of Lotus' application business group, in Cambridge, Mass.
But opinions differ as to whether components, such as presentation graphics tools sold as OCXes, should cost more or less than existing offerings.
Some users think that if components add on specialized functionality to existing applications, then they should cost less.
"Because a given functionality is OLE component-based, it shouldn't sell for as much as the full product," says Brad Scheller, senior manager at International Systems Services Corp., in Stamford, Conn., which provides IS and business process re-engineering consulting services for Fortune 500 companies. Instead of buying upgrades of word processors every time a new set of features is added, you would buy a word processor framework, for example, and pay to add only the features you wanted, such as a workflow engine, Scheller says.
AlphaBlox Corp., a start-up based in Burlington, Mass., for example, is selling OLE 2.0 applets for creating lists or Post-it-like notes in 32- bit Windows documents. AlphaBlox positions its OfficeBlox as an add-on for Office container applications and only charges $70 for its five-component set.
But others have a broader vision and charge more for it. For example, a suite of general-purpose OCX components, including a spreadsheet and text editor from Visual Components Inc., in Lenexa, Kan., costs roughly $450 -- more than what corporate users pay for the entire 32-bit Microsoft Office. Visual Components would also like to charge a run-time fee for its components but says the current market won't support this extra expense.
Others say the retail price of components is irrelevant compared with the technology and cost of ownership issues. Slimmed-down foundation applications and grafted-on components could save money by letting users buy what they will need rather than filling up their hard drives with features that are never used, users and analysts say. Others add that reusing the same general-purpose component, such as a spreadsheet engine, across several specialized applications could mean reduced training costs.
"I wouldn't want to lead you to think there will be dramatic price reductions. The benefit comes in the flexibility and the ability for users to buy what they need and to purchase far richer components," Lotus' Beir says.
This kind of appeal is especially attractive to corporate developers.
"Corporate users can refocus their development efforts to do unique domain things, which they OLE enable. Once they begin this, they get out of the mind-set of doing everything on their own," says Fred George, president of Flat Irons Group, a consultancy and user interface design firm in Boulder, Colo.
A few high-end tool vendors are already taking this idea to the extreme by creating industry-specific business objects designed for deployment on the back end rather than on users' desktops. For example, IBM is working with a consortium of insurance companies, including Prudential Business Systems of Prudential Service Co., in Roseland, N.J., to develop Smalltalk class libraries that encapsulate 80 percent of the business functions common to the insurance industry, such as processing claims. IBM is working on similar frameworks for the banking industry.
Microsoft is also preparing a series of vertical OLE controls called Line of Business, or LOBjects, for specific industries, including retail, life insurance, health care, and manufacturing, that are scheduled to begin hitting the market next year.
These server-based components are customizable, so enterprises can differentiate themselves. But here again, once the components are modified, users and vendors will have to determine who owns what and who maintains what, says Michael Lyons, president and CEO of Dynasty Technologies Inc., in Lisle, Ill., which plans to enter the business object game.
"Distributed business objects presume that you have a repository with full version control that lets you determine in real time the delta between the solution provided and the customized solution, so you know who owns what," Lyons says.
Although no one knows how pricing and distribution questions will be resolved, in all three existing component markets -- end-user applications, developer tools, and back-end business objects -- component technology is driving vendors and users to reconsider the status quo. Many observers think the shift toward components will mean that even if components don't drive software prices down, IS users will get more flexibility and more functionality for the same price.
"I think a mix-and-match approach will prevail with the basic components already bundled," says Karl Wong, PC software analyst at research company Dataquest Inc., in San Jose, Calif. "It's like if you go to a restaurant, you typically order the entree and then pick one or two side dishes, but you always get bread and a salad."
Vendors say that the mixing of the Internet and lightweight components may significantly reduce the manufacturing, distribution, and documentation costs that are currently reflected in software price tags.
World Wide Web sites already exist for downloading OLE and Visual Basic custom controls as well as components for proprietary development tools such as Borland International Inc.'s Delphi or Oracle Corp.'s PowerObjects.
"There's a convenience factor [for users], and on the vendor side, the cost of delivering goods is essentially zero once it becomes part of the infrastructure," said Mike Mitsock, director of product marketing at Crescent Software, a division of Progress Software Corp. in Bedford, Mass.
But here again, questions abound.
Crescent, for example, is struggling with how to price its components. The company reasons that if convenience is important to users, then users will pay more for that convenience, even though the company would pay less to supply the software and documentation.
Component developers such as Lotus Development Corp. say they still need to create ways of tracking and managing free-moving components over WANs to avoid piracy. Technology does exist to automatically turn off software after a period of time, but if a component sells in the $50-to- $100 range, the cost for licensing this kind of protection can cancel out any profit margin, particularly for a small developer, said Laurent Pacalin, Oracle's senior director of worldwide electronic distribution.
Because most companies don't currently have mechanisms for setting up on-line corporate accounts, users must still provide credit card numbers to download the software.
In short, although the advantages of electronic distribution are obvious, a practical way for enterprises to purchase large quantities of software on-line is still on the horizon.
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