Real Battle Royale In Apps Market

*Editor's Note: This is the third of 10 installments of our 5 Hot-Button Issues series, in which we spotlight five things solution providers should keep an eye on over the coming year in various IT and channel categories.

Businesses are run by a menagerie of application software -- databases, spreadsheets, word processors, ERP systems et al -- typically sitting on a variety of PCs and servers.

Yet in the applications arena, big changes in terms of platforms, software delivery and packaging, and the market's key players are under way. Take a look at these five hot-button issues in the apps space.

1. Open Source, Proprietary Or A Mix
Software code -- how it is written, licensed and paid for (or not) -- continues to be a big issue for partners, vendors and customers.

The various license models, some of which require any core code changes to be shared with the community at large and some of which allow intermingling of open and proprietary code, remain a hot topic of conversation. Continued worry about possible liability for using code of unknown provenance still dogs some large companies.

Smaller companies -- Scalix, MySQL, Sun Microsystems, Open-Xchange, Novell -- all field viable alternatives to popular desktop productivity and other tools from Microsoft. The question is whether these "open-sourcey" alternatives can steal appreciable market share or even force Microsoft to be more accommodating on pricing and licensing.

2. Best-Of-Breed Vs. Suites
Microsoft isn't the only company offering a near-complete application stack. Oracle is pitching its own stack, as is SAP and -- to an extent -- IBM.

These companies insist that partners and buyers want the ease and integration of a software stack from one company. Some corporate buyers might hesitate to put so much of their IT budget into one vendor, however.

Oracle's purchase of PeopleSoft, then Siebel Systems and, to a lesser extent, its buyout of smaller players like Oblix and Retek are part of its aggressive attempt to build a soup-to-nuts stack. Microsoft's acquisition roster includes small security and e-mail companies like FrontBridge, GeCad and Sybari.

SAP's acquisitions include A2i, Khimetrics, Praxis and others. IBM has likewise been on a multiyear buying binge to bolster its information management and network management portfolios. 3. Convergence Of Desktop, Enterprise Apps Players
Can SAP leverage its dominance in ERP into other areas? Can Microsoft ride its Windows/Office juggernaut into ERP/CRM and other enterprise apps for big companies?

It's a race. And don't forget that Oracle has bought its way into the second largest enterprise apps company on the planet. Watching these guys duke it out should be interesting. Should IBM rethink its self-proclaimed infrastructure status and move more into applications itself, it could be a real battle royale.

4. Google: The Next Microsoft?
The question would have been laughable three, or even two, years ago. Not so anymore.

Google earlier this year bought Writely and its Web-based word processor. It had already launched gMail and soon after came out with its Web spreadsheet. While no one contends any of these lightweight apps can compete with the features in Microsoft Word or Excel, they offer an ease of use and most of the basic functionality most people want, Googlephiles contend.

If the Google guys can keep the interfaces of these new apps as clean and simple as Google Search, many people might find that very attractive. On the other hand, while thousands of people have signed up for gMail, many would wager that the vast majority are using it as their second -- or even third -- mail address.

5. Apps Served Up Hosted, On-Premise Or A Hybrid?
Salesforce.com's CRM-as-a-service hit the market like a gale-force wind a few years back. The crux is that Salesforce.com hosts the infrastructure and provides an easy interface, while companies pay for the software as they go on a per-user, per-month basis.

Other players -- NetSuite and Webex, for instance -- showed that there is a market for pay-as-you-go subscription apps, although many of them still struggle with long-term profitability. Even mighty Microsoft had to respond and last month acknowledged plans to offer hosted CRM, along with its Windows Live and Office Live hosted infrastructure offerings.

While Microsoft says its initial hosted offerings target consumers and very small companies, no one believes it will limit itself should the services take off. But the company is clearly hedging its bets and says it will deliver software however customers want it -- via license sales, via an ad-supported service, hosted by partners or internally, or some hybrid model.