InformationWeek

Online Shopping For Software

Say goodbye to the software aisle at the local computer mart. As online services expand, more software vendors will deliver goods electronically.

By Mary Hayes

Electronic software distribution means being able to install the latest software on your PC by pressing some keys or making a few mouse clicks. It means eliminating shrink-wrapped software packages. It means considerable convenience and cost savings for technology managers. Add up the increasing sales of CD-ROM drives, the exponential growth of the Internet, the interest in online services, and the proliferation of bo th wide area and local area networks. The result: Electronic software distribution can now be described in terms of "when" rather than "if."

For example, the industry has a keen eye on an as-yet-unnamed service that IBM says it will introduce this year on the IBM Global Network. Big Blue says the service will allow users to browse software titles from both IBM and third-party developers, order software, and specify installation times on specific nodes. In November, IBM announced a partnership with Hughes Network Systems in Germantown, Md., to deliver software via satellites. IBM says that the ability of satellites to deliver large amounts of data rapidly, at a cost based on the time needed to transmit the data, will save customers time and money compared with more conventional methods.

The Satellite Plan
IBM already has laid out a plan for retail customers. Once satellite delivery becomes available, customers will be able to access thousands of software titles via retail kiosks in l ocal software stores. The kiosk system will allow retailers to stock thousands of titles in less than 50 square feet of floor space. Each kiosk will be a self-contained software factory that manufactures program diskettes and CDs at the point of purchase. Initially, software will be supplied to the kiosk via satellites using Hughes' DirecPC satellite communications.

Satellite technology also will allow high-speed delivery of software services to corporations, such as updates, fixes, and other maintenance services. IBM expects to deliver up to 80% of software maintenance services via satellite by year's end 1995.

Still, IBM has provided little detail about the new network or the satellite system, such as pricing, the sales transaction process, and how it will handle large applications. The company says it may deliver software over other networks, such as the Internet, and Prodigy, which it owns jointly with Sears, Roebuck and Co.

Some industry observers speculate that Microsoft Corp. eventually will sell its software through its Microsoft Network online service as early as next year.

Owners of the Windows 95 operating system, due out by mid-1995, will access Microsoft Network directly from the operating system. Microsoft has already taken steps toward online distribution by offering two free software tools on the Internet's World Wide Web. The tools, called Internet Assistant for Microsoft Word 6.0 and Viewer for Word, are designed to help users publish and read documents on the Internet in the format for Microsoft's Word word processor.

Those tools represent the low-hanging fruit in the effort toward electronic software distribution, say analysts. That's because the tools have considerably less memory than most of Microsoft's top-selling software--and that's easier to handle online. The Microsoft Office suite, for example, is a 90-Mbyte program that could take all night to download from an online service.

"Size is definitely a barrier," says Bryan Fukuda, an analyst with Dataquest Inc., a market research firm in San Jose, Calif. With electronic distribution software, he adds, companies also will lose the marketing benefits of software packaging, which can play a part in buying decisions. "I can't imagine electronic software distribution will take off among consumers," he says. "They want something tangible that they can go into a store and buy."

McAfee Associates Inc., a Santa Clara, Calif., provider of antivirus software and LAN tools, has pushed the online distribution envelope farther than most. The company now sells online versions of its software that had previously been sold in shrink-wrapped packages. McAfee, however, uses a sales transaction process that other software makers may not find palatable: the honor system. McAfee president and CEO Bill Larson says most of the company's customers pay up because they don't want to violate antipiracy laws.

A Real Concern
The fear of piracy has made online distribution a real concern for the Business Software Allian ce (BSA), a Washington group backed by such industry heavy hitters as Apple Computer, Lotus Development, and Microsoft. "As distribution becomes electronic, bulletin-board piracy becomes a scary threat to the industry," says Robert Kruger, BSA's director of enforcement.

There are options open to software developers for controlling illegal distribution, but they present their own problems. Encryption, which requires a user to get a code from the developer in order to unlock software, creates difficulties for users who want to create back-up copies of software. And encryption doesn't stop the determined. "We've yet to find a copyright protection device that hasn't been defeated by hackers," says Kruger.

Until all the issues surrounding online distribution are worked out, there are viable methods for avoid- ing the costs and hassles of shrink wrap, such as distributing over WANs and LANs.

Wells Fargo Bank in San Francisco, for one, installed an electronic software distribution system to send software u pdates to 10,000 users on its computing network by 1995. The bank says it developed the system after it tallied up the number of systems administrators it would have taken to provide consistent upgrades to users.

CD-ROMs are proving to be another viable electronic option. When installed on a server, CD-ROMs enable administrators to distribute software to users across a network. With 650 Mbytes of space on a disc, the technology can handle large applications that would take long to distribute via an online service or require numerous diskettes in a shrink-wrapped package. In lieu of large-scale online distribution methods, observers speculate that more software companies will distribute applications via CD-ROM and provide smaller upgrades through online services.

A New Twist
Electronic distribution via CD-ROM will take a new twist in 1995 when WordPerfect, Novell's applications division, releases its PerfectOffice Select CD. The product will contain applications from dozens of ven dors, from which users can choose several at a set price, allowing them to customize their desktop suites. Then users will call WordPerfect to get codes that would unlock the encrypted software.

Microsoft is working on a CD-ROM development project for its Office desktop suite, called Ali Baba, that would include demonstrations of complimentary products by third parties. That way, corporations that standardize on WordPerfect's PerfectOffice Select or Microsoft's future CD-ROM will be able to send thousands of productivity applications across LANs or WANs without using a single box.

There are plenty of market forces to overcome before electronic software distribution is broadly implemented. Companies are determining how users will pay for the software, and how they can distribute it without cutting out the sales channel of distributors and resellers.

"At some point, online distribution will become a reality," says Robert Bach, group product manager for the Microsoft Office business software bundle. " We're experimenting with some things, and sooner or later we'll get there."

Online distribution has one compelling factor going for it: peer pressure. As the competition heats up in the software market, more companies will use a variety of new distribution methods to get their wares to users cheaper, faster, and more conveniently. Those methods add up to electronic software distribution.

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