On-Demand Software Goes Mainstream in 2006

One of the premier proponents of SaaS, Marc Benioff, CEO of on-demand CRM company Salesforce.com in San Francisco, agrees with the view that SaaS has achieved a critical mass of acceptance.

"In 2006, more companies are going to be looking for on demand than ever before to try to move away from the [on-premise] software model," Benioff said.

"I think that on-demand is just getting going…we are just at the beginning," he said. But it has taken years of development work to get to this point, for Salesforce.com and other on-demand software ventures, he noted.

Benioff said he believes that office productivity software, such as word processors, e-mail and spreadsheets, will be the next application to be offered on demand.

Growing interest in the use of AJAX (Asynchronous JavaScript and XML) programming technology makes it easier for developers to create interactive Web-based applications, and will help drive the launch of new SaaS companies and applications, Benioff said.

Click here to read how Microsoft plans to respond to the demand for on-demand software.

There has been a significant shift in customer attitudes and their knowledge about SaaS over the past couple of years, said Stephen Savignano, CEO of Ketera Technologies Inc. of Santa Clara, Calif., which markets an on-demand corporate spending management application.

A couple of years ago, Ketera and other SaaS companies spent a lot time explaining the basic concept of SaaS and how it worked, he said. Potential customers had many questions about application hosting, data security, performance and reliability.

Now more frequently when Ketera starts this conversation, the customers "put up their hands up and say you dont have to explain that to me. Im already there. Thats why Im talking to you," Savignano said.

Now, he said, customers want to know how the on-demand products will evolve and ask "what is the next generation of software as a service?"

However, Savignano contends that some customers are being confused by the established client-server application software vendors—which he calls "wolves in sheeps clothing"—that are now claiming to offer their products as on-demand hosted services.

Customers need to be careful to make sure that the applications are single-instance, multi-tenant applications, he said. Or they are offering the on-demand model as a way to enter the small and midsize corporate market while they continue to charge their large enterprise customers exorbitant software license and maintenance fees, he said.

Customers are moving to on-demand SaaS applications because they can get out from under these fees with a service that is provided at manageable per user costs and with guaranteed service level agreements.

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