What Are Hosted Applications,Benefits & Concerns

As access to the Internet becomes more widespread with faster, more reliable and always on connections becoming the norm the growth of applications using the hosted application model continues to expand.
Although hosted applications will not suit every situation, or every customer, they offer many individuals and organizations, as well as the application manufacturers themselves, considerable benefits over the locally installed application.
What Is A Hosted Application
A hosted application, also known as Internet based application, web based application, online application and Application Service Providers ASPs are software applications where the software resides on servers that are accessed through the Internet instead of the more traditional software that is installed on either a local server or on individual PCs.
The thin client concept is nothing new but advances in Internet connectivity have allowed the application to move from a local server to a server on the Internet.
Example of hosted applications would be Salesforce.com that provides customer relationship management facilities, Netsuite offering all in one business management applications and SurveyGalaxy.com that provides their customers with an enterprise survey and questionnaires application.
What Are The Benefits
Reduced costs, instant deployment, easier to maintain and reduced administration are among some of the main benefits.
Low Maintenance
With hosted applications the hardware and software is the responsibility of the vendor with the client only having to maintain access to the Internet. As there is no software to download a hosted application can be made instantly available across an entire organization even where the organization has multiple regional and international offices.
As there is no software the considerable time and resources required for periodic updates is also completely eliminated.
Reduced Cost
The need to license software through a per user, per concurrent user, per server or site license has been eliminated. Although some hosted applications still do charge per user many have taken the opportunity to charge on a usage and period basis meaning that the customer does not have to estimate the number of licenses that will be required, nor install and pay for full licenses that may only be used by some employees occasionally.
This hosted application model also allows the smaller organization and sole trader access to applications written using advanced software development tools and that utilizes sophisticated database technology and high end servers. The capital investment of the hardware and software as well as the security, backup and server maintenance cost are all the responsibility of the vendor.

Minimal Risk
Many hosted applications require no long-term commitment from their customers. New customers can often test hosted applications either through a free introduction offer or with minimal risk using a Pay As You Go model. If after trialing the hosted application the customer finds it unsuitable then they can simply stop using the service.
Access
Because the application software and the data is stored on the Internet server the application and data is available to the authorized client once they have logged on from anywhere there is Internet access. The customer can now work anywhere in the office environment, from remote offices or from their home or hotel without the need to download their work or synchronize with portable devices.
Integration
For organizations that have legacy systems from different suppliers running different operating systems the hosted application will provide an integrated solution to any system that supports a standard Internet browser including Windows, Unix and Macs.
Support
The hosted application vendors benefit by not having to maintain multiple version numbers or individual maintenance and licensing agreements. New updates are installed centrally negating the need for expensive rollouts. For many applications the need for version numbers is eliminated as updates are made incrementally bringing the benefits to the customer without having to bundle new features up into a new periodic version release. In some cases a user can request a new feature in the morning that can be developed, tested and deployed globally by the afternoon.
The Concerns
Internet access
New communication technology is able to bring high speed Internet connectivity to more and more remote places but there are still some regions where internet access is limited or not available.
In some cases such as mobile workers although high speed Internet connectivity is available the cost both in terms of connectivity charges and equipment may, at least in the short term, prove to be prohibitive.
Security
As with everything to do with the Internet security is a justified concern. There is no simple one size fits all solution to the security issue and a lot will depend on the specific hosted application and the nature of the data.
With online banking and shopping becoming common place the vendor should be able to provide their clients with sufficient confidence that the data is secure and that any private information remains private.
Hosted applications will normally operate a login procedure ensuring that only those that are authorized have access. The more sensitive the data, the more sophisticated the login procedure.
A good data host will strictly enforce the stated wishes of their customers and ensure that data is not available or released to anyone that is not legally entitled to see it and they will adopt the latest security measures available to prevent unauthorized access.
There may be some areas such as automatic logins from known PCs and the use of cookies that although they do not necessary represent a significant risk could present a risk under certain circumstances, such as gaining access to a private account through the automatic login using an unattended PC. Although strictly speaking the customers responsibility the customer should be made aware of the risks so that they can take action to safeguard their own system.
Although security is a concern in some circumstances private data may prove to be more secure than it would be on a private network with less sophisticated security measures or in an environment where there is a risk from within.
Vendor Lock In
As with all software applications there is a risk that a customer could become locked in to paying costly monthly subscriptions to maintain access to their historic data. To counter this some applications will allow the data to be downloaded or allow customer to maintain access to their data for a reasonable time free of charge.
Control
Unlike a local application the hardware and software is under the control of a third party. This is a justifiable concern although not too dissimilar to the telephone provider supplying and maintaining the communications equipment and there are considerable incentives for the vendors to ensure high availability and reliability since their business depends on it.
In Summary
Benefits

No vendor installation or upgrades required
Low start up costs
Minimal Risk, no long term commitment
Backups and viruses responsibility of the vendor
Hardware and software server maintenance vendors responsibility
Investment in local hardware & software reduced
No need to synchronized data with multiple devices
Access to data available globally through any internet connection
Reduced software licensing costs

Concerns
Lack of Internet availability
Security
Possibility of vendor lock in