What Are Hosted Applications?

By: Martin Day

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 PC's.

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/or '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 utilize 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.


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.


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.


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 roll outs. 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.


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 PC's and the use of cookies that although they don't 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 customer's 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.


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

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 vendor's 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


Lack of Internet availability Security Possibility of vendor lock-in


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