Now, there are hybrids of these applications -- take iTunes as an example - you install the iTunes applications, but the real functionality is driven by the "backend" server. And applications like Salesforce.com have "offline" capabilities. But in general, the applications live and breath on some distant server, accessible only through your internet connection.
Below is a news story about Google Apps - and the growth they have seen. $400M is great revenue -- but the question would be how much additional revenue (not directly attributed to someone paying for Google Apps) has it driven. Has it been worth all the various investments and purchases? Still too early to tell, but I would imagine you will see many of the mainline software/applications companies move their products to the SaaS model - it only makes sense.
Google Apps Already a $400 Million Business?*
Henry Blodget | March 2, 2008 9:01 AM
TechCrunch's Michael Arrington cites a Google source who puts Google Apps revenue at 2%-3% of Google's revenue, or about $400 million. This up 10X from $40 million last year.
For paying Google App customers (small minority of all users), our understanding is that the price is about $50/user per year. So this would imply about 8mm users, which seems high*. But let's take it at face value for a moment.
$400 million is peanuts relative to Office ($18 billion) and Google ($17 billion), but it's still meaningful and impressive. The product didn't even exist three years ago. A stand-alone company offering Google Apps with $400 million in revenue would be valued at at least $4 billion, based on Salesforce.com's 10X revenue multiple.
Not bad for a product (Google Apps) that many people still consider irrelevant. Also not bad for a company (Google) that most people still consider a one-hit wonder.
If Microsoft doesn't view Google Apps as a disruptive technology that could eventually decimate the value of its most important business, it should. Nick Carr hears Microsoft is finally preparing to launch a Google App killer. For the sake of Microsoft shareholders, we hope so.