Online Software Distribution on a roll

You have got to hand it to Microsoft. If there is potential for money to be made, they have got a business plan and a proposed standard at the ready. And when the world's largest independent software publisher speaks, the industry is inclined to listen.

Microsoft has quickly taken to Internet-based electronic software distribution, a fledgling method that will have implications for I/S shops and developers as it begins to impact issues such as license management, upgrades and version control.

Internet-based electronic software distribution (ESD)enables a user to buy software online and then download the product directly to the desktop. Its roots are the freeware and shareware programs that proliferated among programmers before the heady days of the World-Wide Web. Also preceding ESD were beta versions of software programs and bug fixes posted on vendors' Web sites and freely available for download. Meanwhile, Netscape Communications Corp., Mountain View, Calif., built its business around a new model of beta testing that called for posting point releases and fixes within shorter and shorter cycle times and seeded the market with its browser.

Redmond admittedly missed the start of the Internet revolution, but quickly gained ground by Internet enabling existing products, gobbling up content and cable TV companies, and taking pages out of the strategy books of Internet pioneers and competitors. While a nascent technology, and not nearly as splashy as battles over Java and browsers, electronic software distribution over the Internet represents another area for Microsoft to control.

As a channel for distributing beta software and freeware/shareware, the Internet has clearly proven effective. Users are comfortable with the concept of downloading software. It is no surprise, then, that software publishers and resellers smell money. But Internet distribution promises to do more than create a cyber supply chain that alters the way the world buys and sells software. As electronic software distribution dovetails with push technology and broadcasting, as well as with new product delivery schemes such as software subscriptions and rentable applications, a new paradigm for distribution, asset management and development emerges that can impact software publishers, corporate developers and I/S administrators.

As in many areas, Microsoft was not the first to dabble in electronic software distribution, though it has become probably the industry's most prominent provider of such technology. McAfee Associates Inc., Santa Clara, Calif. is a pioneer in the selling and delivering of products over the Internet. As a matter of fact, the company was founded on an electronic distribution model, says marketing vice president Zack Nelson. Founder John McAfee, at the time moonlighting from his engineering job at Lockheed, posted a toolkit he developed on a BBS. He simply asked whoever downloaded and liked the toolkit to send him a fee.

McAfee has not strayed far from that model, says Nelson. "Ninety percent of our software is distributed electronically."

Other pioneers include online service providers CompuServe Inc., Hilliard, Ohio, and America Online Inc., Dulles, Va., which have experimented with downloads and online software stores. They were followed by, and Online Interactive (recently acquired by Micro Warehouse Inc.) opening electronic software distribution stores on the Internet.

Online software distribution took a step forward in 1995 during a meeting of officials from Microsoft, Portland Software, Portland, Ore., LitleNet, Lowell, Mass., and Online Interactive Inc., Seattle. To create a formal "channel" and process for distribution. A month after that meeting, Microsoft launched a pilot system that included: Portland Software's ZipLock "wrapping" technology for compressing and encrypting the software into a "bag of bits" (BOB); an Online Interactive built cyber storefront; and LitleNet, acting as the clearinghouse, provided the "key" to unlock the encrypted software, while managing end-user license agreements, and recording and reporting the details of the transaction to all the parties.

"Distribution via the Internet was occurring prior to the Microsoft pilot," says Charles Jennings, chief executive at Portland Software, but the pilot "for the first time established a channel standard for ESD and introduced the concept of the clearinghouse. It also resulted in Microsoft certifying certain technologies, such as ZipLock."

Two "radical" concepts came out of the Microsoft model, says Robin Palmer, partner in charge of electronic commerce for KPMG Peat Marwick, New York City, which also worked with Microsoft on the project.

First was the concept that separated the bits from the right to use the software. Thus, whether the bits were downloaded to the desktop, on a CD-ROM or preinstalled on a computer, a separate step - obtaining a key - was required to activate the software.

The second concept, says Palmer, laid the groundwork for moving away from "the notion of a perpetual license." The architecture "ensured a mechanism to support a more flexible scheme, like time-based or component-based, and maybe facilitate returns and upgrades," he said.

KPMG proposed a central clearinghouse operated by a trusted third party, which would provide keys or digital certificates to unlock software and manage license databases. That model, submitted jointly by KPMG and Microsoft, was included in guidelines published by the Software Publishers Association, Washington D.C.

While this new distribution channel is emerging, publishers are also using the Internet as an enabler to sell products directly. Many have established Internet storefronts for selling software. While some offer downloads, most call for a customer to order software online, but the package is shipped via traditional means.

One development tools vendor, Rational Software Corp., Santa Clara, Calif., made a foray into ESD utilizing the channel, selling Rational Rose and some add-on products for via However, Rational quickly halted the practice, deciding that electronic software distribution is a strategic issue and, in light of its myriad acquisitions and subsequent changing business model, stepped back to rethink its plans, according to Ed Gaudette, director of corporate marketing.

Today, Web manager Kristan Jiles says Rational is again looking to sell products directly on the Web site. "One advantage with our Web site is that it not only sells products, but also training. We can be more customer service oriented. It's more difficult to get a third party on board with that."

Today, the bulk of electronic software distribution transactions are for single-user copies of software that have reasonable download times. To reach the commercial market, experts say several technology and business issues need to be solved.

Bandwidth, of course, is a key issue, as is the difficulty of downloading software. The next big area for electronic software distribution to address is volume licensing. "We have a simple license management functionality today based on single licenses delivered to individual users," says Portland's Jennings. "The next step is to integrate volume licensing and asset management technologies into a single Internet-based delivery system. It will be one of key growth areas in 1998, and we are in active development of solutions."

"We're still figuring out how to deal with volume licensing in ESD," agrees Microsoft's Javed Chaudry, marketing manager for electronic software distribution. "In the corporate world, it's not just fulfillment of code, it's more like software asset management. That's a more critical need ESD can fulfill. We're also working to facilitate license management and tie it in with fulfillment electronically." Chaudry says he does not expect a near-term solution.

Indeed, ESD raises concerns for I/S managers. "[I/S] doesn't want people downloading to desktop," says Robert Fraser, president of NetSales, an Overland Park, Kansas, provider of distribution Web solutions for electronic distribution and electronic commerce. "The whole model so far has been a retail model."

Lack of I/S administrative control is one of four barriers to today's model, says David Rubin, president of BITSource, Inc., Los Altos, Calif., a provider of turnkey distribution solutions. The others are: a lack of bandwidth; security issues; and the lack of physical media such as documentation and backup compact disks.

BITSource positions its product, SmartShelf, as a potential solution for resellers and for corporate I/S. Using this architecture, encrypted software titles can reside on the PC of a reseller or I/S manager, who can unlock and deliver the software onto a recordable CD or hard disk. Customers pay the reseller using traditional means -- online transfer of credit card information is not required.

"I/S managers don't want their customers downloading from God knows who," says Rubin. "The SmartShelf Control Suite lets them set a full suite of controls. The reseller sets the pricing; the corporate customer can control the user permissions." Once a user creates an order, it goes through the company's normal requisition process. "When a purchaser cuts a purchase order in the system, they can go into the online catalog, approve the order, and it's ready to be fulfilled. The key sent automatically to unlock the encrypted package. The I/S manager can fulfill the order to a hard drive or CD."

Payment is another business to business issue that remains to be worked out, as large corporate purchases will unlikely be transacted via credit card. "How do you integrate bill payment and bill presentment systems," said KPMG's Palmer. "There's a lot of work to be done."

Online software distribution provides an avenue for software vendors to get to market faster and make available up to date versions of products, making the "buying" of software an iterative process similar to the development of software. Where the beta ends and the finished product begins is becoming less defined.

Product development is "really a cycle," says Sherry Zedeck, senior product marketing manager for NuMega Technologies Inc., a testing tool vendor based in Nashua, N.H.. "You've done the design, the coding, the debugging, but once you've released it you're back working on the next version, so it's not really ever final. That's where we're going, and I think users have to feel same way about software they develop."

An iterative way to buy software is through emerging software subscription plans being implemented by vendors like NuMega. While the practice of making patches and fixes available on vendor Web sites for download is common, software subscriptions are more proactive and frequently offer more than a traditional maintenance plan.

NuMega, for example, launched its Smart Subscription plan with the release of DevPartner Studio Registered subscribers receive E-mail notification of point releases, fixes, as well as new point products for the suite, which they can download through the vendor's FTP site.

Kathy Stevens, a project manager at Apple Computer, Cupertino, Calif., says her development teams like NuMega's Smart Subscription plan because of its timeliness. "We need to stay up-to-date on debugging tools, and [the plan] does include new products. That's one of the things the engineers found really exciting, to get this stuff before it hits the market."

Stevens says the subscription plan also makes administration easier. "It's easier to manage upgrades to new products as they come out," she says. "We may have six engineers working on something, and we need to make sure they have same version." Because all of her engineers are subscribers, accessibility will make upgrades happen, she says. "When we weren't on a subscription, it was hard to get everybody on the same version at same time."

What about "push" or broadcasting?

Microsoft's Chaudry says his firm has not finalized its software subscription plan, but notes, "Internet-based fulfillment for subscriptions does make sense. The frequency of upgrades is so high that users don't want to wait."

McAfee, using technology from BackWeb and McAfee's SecureCast product, can push software updates down to clients as part of its service and support program. McAfee's Nelson says about 2,000 corporate clients and 40,000 end users have signed up for this service. Nelson says McAfee addresses issues of I/S control raised by push technology raises. "Many I/S professionals don't want us to have the right to push to the desktop," Nelson said. Through functionality in McAfee's Zero Administration Client suite, McAfee can push to an administrative desktop, and then the administrator can push the upgrade to the end users' desktops.

"Antivirus is per- fect software for ESD, and in particular, push works well," says Nelson.

Other types of software, such as development or debugging tools, may not be as well suited to push. Says NuMega's Zedeck, "It's not likely a developer wants to change tools midstream in a project. They may want to wait until the next project to move [to an upgrade]. That's why push will not work for developers."

KPMG's Palmer sees push technology serving the purpose of pushing out new components through a software subscription, but that requires that the industry fulfill the vision of true component based or object oriented software, he says. "We need to start designing software to support those capabilities. It's a ways off. There will be more value with time based or component-based licensing, but that means turning the whole [development] model upside down."

The groundwork is being laid to do just that. Recently, Marimba Inc., Palo Alto, Calif., and Microsoft jointly proposed a data format standard to automate software distribution and update over the Internet. The Open Software Description (OSD) specification, which is based on the eXtensible Mark-up Language (XML), provides a data format to describe software components, their versions, their underlying structure and their relationships to other components. Internet companies such as Netscape CyberMedia have already endorsed OSD.

The technology will be part of Marimba's products for distributing, or pushing, information through networks. Observers have also likened OSD to an "enterprise ESD."

"We still give software away," says McAfee's Nelson. "By giving it away, it comes back tenfold."

Colleen Frye is a freelance writer based in Bridgewater, Mass.

Today's Beta: Public versus controlled

The always iterative process of developing software, which is feeding a new iterative process of buying software, was clearly fuel-injected by the browser wars. In their battle to dominate the browser market, Microsoft and Netscape posted beta versions and endless point releases and fixes for the world to download. While the huge wave of user feedback helped the vendors speed development cycles, and clearly seeded the market, not every software developer feels this model is appropriate.

For instance, tools vendors Rational and NuMega both prefer a more controlled beta. NuMega says it looks for users who are willing to register, provide information about who they are, and get involved with the process. A typical beta involves about 200 people at most. "We want to make sure we have the right set of users exercising our product, and providing good feedback in timely fashion," says Shari Zedeck, senior product marketing manager.

Rational's Eric Shurr, vice president of marketing, expresses similar feelings. The company allows only its registered beta customers to download from its Web and FTP sites. "The purpose of a beta is to have people knowledgeable with your product work with new versions. That means you're pretty selective about the beta, and work closely with them." Posting products to a Web site for anyone to download "may be more appropriate for products like Windows 98 with millions of people using it. When you sell tools like ours, which are sophisticated development tools, it's a little less important to get access to everybody in the world."

Plus, he adds, "If I put beta up on the Web, the first people to go there are the competition."

On the other hand, Sheridan Software Systems Inc., a Melville, N.Y.-based, developer of visual tools and components for Visual Basic, is now using a combination of a traditional controlled beta followed by a public beta. Bob Wolf, president, says this method "multiplies the kind of feedback we get." He says the level of feedback is fairly good. "We're dealing with developers. If they're going to take the time [to download it], they'll get into it as far as they can."

Wolf says that a public beta does not actually shorten cycle time, but the additional user feedback does give the vendor "a longer beta cycle within same period of time."

Getting quality feedback is important whether a developer conducts a public or controlled beta. A new product from Aqueduct Software Inc., Menlo Park, Calif., is a software management product that attaches to the application program and sends usage data back to the developer via Internet E-mail protocols as the application is being run.

Intrinsa Corp., Mountain View, Calif., developer of defect detection tools, is using Aqueduct's Profiler as part of its controlled beta program. The young company did not have the resources to send engineers to all the beta sites to survey how users utilized the product. "We would have to have somebody on-site to see what they [beta testers] really do versus what they tell you," says John Pincus, CTO of Intrinsa Corp. "Beta testers want to tell you they're using the product all time. The Profiler tells us how long they're using it, when, etc."

The information gathered with the initial use of the Profiler was "significant to our underlying business model, and would inform our pricing and packaging decisions," says Pincus. "There are different ways different sites use the product. We now have hard information about the ways they use it, and we designed our licensing schemes to reflect that."

In addition to beta use, Intrinsa has also embedded Aqueduct's Profiler in the finished product. "Product managers can look at the information [collected] and do various kinds of queries. For example, our product finds a lot of different kinds of defects. We may want to know which kinds of defects we find the most often."

Intrinsa discloses to its customers up front that Profiler is embedded in the product. Should that be a concern to any customer, Pincus says "it's easy to turn off. We make it clear that we're not using [the information] in a punitive way, but rather to understand how to improve the product. Most of the people who buy software tend to buy it as a long-term investment. They want the software to get better."

He continues, "People are really investing in a relationship. People could pirate software if they wanted, but most don't. As well as the moral reasons, they know they get more than just the software. They get a future direction."

Intrinsa believes that customer support is a crucial part of good software development, Pincus says, and that comes down from Intrinsa's CEO. Using the Profiler, he says, "is an effective way to get customer input and get them involved, and to do in a proactive sense."