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RECENT INNOVATIONS IN Web-based software are making it easier for businesses to communicate and collaborate without purchasing expensive equipment or programs. In fact, many of the services available are free, and for small or solo operations that want to look like Fortune 500 firms, Web-based services are a dream come true.

Web 2.0 refers to software that is accessible using any computer connected to the Internet, from shared calendars and to-do lists to project management tools.

Writely is a Web 2.0 site that offers a word processing program in which multiple collaborators can be given access to particular documents, with changes tracked by time and user. Central Desktop is a collaboration tool that allows teams to work together on project management, allowing members to add documents, Web links, comments, and scheduling information. It offers a variety of communications options, including instant messaging and discussion boards.

Some Web 2.0 companies charge for their services. Central Desktop has a variety of monthly plans based on factors such as the amount of storage space needed. Others, like Writely, are free but plan on providing extra services (such as increased storage space) on a subscription basis in the future. Still others offer a mix of products, some free and some for a price. A few have been bought up by companies with deep pockets. For example, last year eBay bought Skype, a provider of free voice-over-IP (VoIP) telephony. (For more on VoIP, see page 74.)

While these services help make a small business look big, they raise questions of how secure saved documents, calendars, and lists of e-mail addresses are when located on these third-party sites.

Jen Mazzon of Writely says the company uses a layered security architecture to ensure that documents saved on the site are safe from prying eyes—and from Web “spiders” that troll the Internet cataloging content.

Mazzon says that the company also takes additional steps to provide robust protection. “Writely backs up your documents to remote servers every 10 seconds” and enables users to save copies of documents to their disks as well, she says. “Since Writely is 100 percent hosted and doesn’t require any software installation, it is not affected by viruses that corrupt files on your hard drive,” she adds.

Central Desktop CEO and cofounder Isaac Garcia says that the company takes security considerations very seriously, with strong encryption in place along with an architecture that prevents one Central Desktop user from accessing another’s data without permission.

In addition to network security features, Garcia says the company’s physical infrastructure is ready for any situation. “Our servers are hosted in a state-of-the-art data center, designed to withstand a magnitude 8.3 earthquake,” with 28 days’ worth of backup generator power.

This all sounds great, but perhaps you remember when application service providers (ASPs) were offering these same services—and how some client companies were left in the lurch when many of these companies disappeared. So what happens if one of these new ventures doesn’t last?

That’s a legitimate concern, says Jason Fried, one of the creators of 37signals, which offers several free and for-fee Web-based products. “There’s always the risk of a company going belly up. That will never change.”

Garcia says that it’s not uncommon for customers to have concerns about financial stability working with a young company like his. “One simple way that we put our customers at ease is that we provide our customers with the ability to download or export the Web pages, files, and documents of their workspace,” he says, so a customer can store this information locally. “After all, it’s not our data, it’s our customers’ data,” he says.

Writely’s Mazzon adds, “A company should assess Web 2.0 companies the same way they would evaluate any potential vendor. As long as they select the most qualified, suitable vendor, I would think that they are minimizing the chances that a mid-project belly-up will occur.”

Technological advances make this risk smaller than it was, Garcia says, adding that it’s much cheaper to maintain the multiple servers needed to run this kind of site than it was years ago. At the same time, bandwidth is both cheaper and faster and servers are much smaller. “This just means that it’s cheaper to maintain the infrastructure for young companies,” he says, and that makes it less likely that they will go out of business.