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A key factor in the scalability of applications is to use a vendor that offers the full range of applications that you can reasonably envisage using over time and which can be added to your base product. If this isn't possible, ensure the applications use a technology that is either open source or can be extended. Some developers tie up the data and coding so tightly it's impossible or costly to hook additional applications onto it and this means the application's growth potential is limited. Other developers use industry standard languages or offer software development kits that enable additional modules to be created to interface with that application.

"The ideal of a scalable enterprise where IT grows (and shrinks) with the business sounds like commonsense. It is, but the devil is in the detail."One software delivery option that offers scalability in the number of users, the geographical spread of users and in the applications which are provided to those users, is a hosted software solution, sometimes known as software-as-a-service. Hosted solution providers supply the software and licences so you pay only for what you use, usually quoted in a per seat cost. If your workforce grows, you pay for the extra people using the system and, if it shrinks, you pay less.

Hosted solutions are attractive partly because of their flexibility- you add and remove seats generally within days or hours. In general, these applications are internet browser based, so they require little more than a computer, browser, and an internet connection to get up and running, and additional software is seldom required.

The service cost for adding more users to a hosted system is borne indirectly by your company because it's generally built into the per seat cost. Having the solution provided externally has the added advantage of not needing dedicated IT personnel to manage the set-up and ongoing administration, and it means you're not juggling competing priorities with your IT department. When starting out, a hosted solution can be purchased and up and running within days, in contrast to custom developed solutions which may take months to implement.

Many hosted solutions are provided as a series of modules, so you buy the services as you need them. If you start out with a limited set of applications or features and later decide you need more, you can add modules which are already integrated into the program very quickly. In addition, time-consuming tasks like updates, backup and security issues are handled centrally by the hosting company so you don't have to worry about them.

Counting costs

While hosted applications offer scalability and some flexibility to an enterprise, it comes at a price. For example, with hosted solutions you have an ultimate inability to modify the program. As Liz Herbert, analyst at Forrester Research, cautions: "Unlike on-premises or outsourced software where you own the code and have full liberty to modify it, with software-as-a-service you are limited to the customisation tools exposed by the vendor, and add-on solutions and custom scripts that the vendor supports.

Firms must be able to make the solution fit their business needs-so that they don't end up adapting processes to the software." That said, most hosted solutions offer a level of customisation at the business user end where additional reports and features can be easily added without requiring any programming skills, again freeing the user from having to coax specialist IT staff to do the work.

For some start-ups and fast growing companies, using hosted applications allows the ultimate in scalability: getting out quickly. "Companies that are growing and innovating will outgrow their business applications fairly quickly," says Paul Hamerman, Forrester vice president. The subscription model provides the flexibility to change application vendors without scrapping capitalised software licence and hardware investments."

The flip side of hosted applications is the offline market where software is installed on a business's computers.

Here, scalability is addressed by the business buying a solution that has the anticipated expandability built in. Companies like Attache Software have identified a problem of small business underbuying on software, and have addressed it in innovative ways. "When the GST was introduced, many SMEs installed 'off-the-shelf' accounting packages which were probably too small to start with and have not scaled with their business," says Michael Rich, managing director of Attache Software. "Now they need to consider more expensive but scalable 'mid-range' packages, but SMEs are rightly worried that history could repeat itself."

Recognising this, Attache recently introduced a plan which enables SMEs to install their 'mid-range' accounting software for a small monthly maintenance cost, with the option to stop it-without penalty-if they aren't happy or their business totally changes. "Most importantly, it lets them grow or scale the software for just a few dollars extra a month, rather than be faced with another major purchase decision."