LA Times
( Monday December 13 1999 )

Software for Rent Might Yet Make Microsoft Sweat
By CHARLES PLLER

Microsoft often says that its hold on the fast-changing world of computer software faces powerful new threats every day. It's tempting to laugh off that refrain as a diversionary tactic in Microsoft's antitrust wars. But a tiny "dot-com" start-up recently launched what could ultimately emerge as a true alternative for mainstream computing: free office-productivity software and the low-cost rental of other applications. That model could eventually prove more worrisome to Microsoft than its legal problems.

Understand first that this is still a conceptual threat; for not even the Justice Department will unseat Bill Gates as software's emperor any time soon. But MyWebOS.com, based in Baltimore, offers a provocative Web-based replacement for Windows and Microsoft Office as the central software tools for most PC users.

MyWebOS strongly resembles the Windows desktop and comes equipped with a range of free productivity and communication applications, such as a calendar, contact manager, e-mail client and Web browser, as well as a file-navigation program modeled on Windows Explorer.

Because these new software programs and files reside on MyWebOS server computers rather than on individual PCs, users can access them from any PC via an Internet connection.

The new company hopes to make its money as a host platform for a wide range of other software tools created by independent developers. Users would rent rather than buy those applications.

Most of these tools already are free on a range of Web sites, so why would anyone want to use a separate operating system inside a browser? One reason would be MyWeb's HyperOffice, an accompanying suite of free business applications: word processor, spreadsheet, database manager and a tool for creating business presentations. MyWebOS will also offer 20 megabytes of free storage space--enough for many typical users' business files.

MyWebOS is still in "beta" testing, and its test version of the product falls far short of its ultimate goal. Only the word processor portion of its HyperOffice suite is up and running. The other products are scheduled to debut early next year, when the service will formally debut.

Yet the company's goal is clear. "We want to turn the software market into something like the utility market," said MyWebOS.com Chief Executive Shervin Pishevar.

By utility, he's thinking of an electrical power utility.

Pishevar proposes to meter the use of, say, tax software at 50 cents an hour. Most people use such programs no more than 20 hours a year, but pay $50 or more for the latest version every winter. Under his plan, a consumer would save $40 per year.

Or perhaps your business relies on an expensive customized program, but your field offices use the program only occasionally. Does it make more sense to buy each office a copy for $10,000 a pop, or to rent it at $100 an hour for one hour every month?

In addition to earning commissions from software rentals, MyWebOS plans to become an "infomediary"--combining the collective buying power of its users into one block to command discounts on goods and services, and taking a cut in the process. Pishevar thinks this will provide sufficient revenue; no banner ads will clutter the screen, making MyWebOS sufficiently businesslike to run a business on.

That model resembles an emerging software distribution model from companies referred to as application service providers, or ASPs. Typically, ASPs structure pricing on a monthly or annual basis per user for corporate accounts, though individual plans are now available. For example, Fountain Valley-based Personable.com offers Microsoft Office and other applications for $9.95 and up a month, plus storage and access fees.

The MyWebOS pay-per-use plan democratizes the ASP model, making software rental accessible to anyone at a much lower price.

Pishevar positions MyWebOS as no threat to Microsoft (and even says he'd love to offer Microsoft Office as a rental option). But Microsoft should hate this product for several reasons.

First, MyWebOS would provide a self-contained environment, complete with software developer guidelines and incentives, something like the way Microsoft woos developers to the Windows platform. Users with modest computing needs--and that's most people--could do all their computing within MyWebOS rather than living inside Microsoft's Windows, Office and Internet Explorer browser environments.

Second, if successful, the MyWebOS model would go a long way toward turning business productivity applications into commodities, just like Microsoft did to the Web browser by giving it away. (Microsoft antagonist Sun Microsystems is abetting this process by giving away its own office suite, Star Office.)

"People have been getting ripped off with the incredibly high [profit] margins for boxed software," said Pishevar. "Why should a person pay $400 for an application that they might only use 10 times?"

If consumers and small businesses agree with his logic, many will stop paying for Microsoft Office (which can cost about $300 bought off the shelf.) And PC vendors--already feeling more independent as Microsoft operates in the antitrust spotlight--might start wondering why they should pay Microsoft for a copy of Office to bundle in every new PC in an era of ferocious price competition.

Finally, if Pishevar is right, MyWebOS.com and similar companies could turn software from a product into a service, undermining Microsoft's ability to push Office into every PC in the world. Meanwhile, WebOS could seize a big part of the Web toll-taker function that industry observers have long seen as Microsoft's hidden agenda.

"This is one of the most important trends we're viewing now," said Rob Enderle, an analyst with Giga Information Group, based in Norwell, Mass. Microsoft has already been hinting that it might respond with its own pay-per-use service, even though that would cannibalize Office sales.

To be sure, MyWebOS is far from ready to foment a software revolution. First it has to approach the reliability and performance of Windows and Office (though it won't need to match the bloated features on Microsoft's package) and perfect an enticing billing scheme for application rental.

But the MyWebOS concept is compelling. And several other start-ups--such as Magicaldesk.com and Desktop.com--are beginning to offer similar models for changing the way people obtain and use basic software programs.

Collectively they're a hopeful sign, as Microsoft likes to say, that the Web is making it hard for anyone to hold a lock on the world of software.