Last month's column discussed the growing gap between the handful of companies that have continued to deploy innovative technologies despite the current weak economy and the majority that have focused primarily on cost reduction. (See (www.dmreview.com/master.cfm?NavID=193&EdID=7360.) This month, let's turn to a related but happier topic: the ability of very small companies to use hosted services to benefit from innovation.

Hosted services ­– in which a vendor runs software for its clients, typically in return for a monthly fee –­ are indeed hot. Compared with traditional run-it-yourself software, hosted services allow quicker deployment with less risk of failure and a much lower initial cost. The long-term cost is not necessarily cheaper than in-house systems; however, in a period of budget constraint, this is less important than avoiding high capital outlays and deployment expenses. In fact, hosted systems can sometimes even be funded out of operating budgets that are directly controlled by business departments, bypassing the capital appropriation process entirely. The corresponding ability to do at least a partial end run around the corporate IT group may also be a significant advantage in some situations, at least from the business department's standpoint.

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