Retailers looking to execute quick, affordable IT upgrades turned to hosted software providers last year as they prepared for what turned out to be a stellar holiday season for online shopping.

In the last few weeks of the season, online shoppers responded to Web promotions in force, and the year ended well for online and multi-channel retailers, according to industry watchers. ComScore Networks reports online sales between November 1 and December 25 totaled $18.11 billion -- up 25% over the 2004 holiday shopping period.

For the retailers, new technologies deployed in advance of the season helped them get the most from Web visits. In particular, many retailers went for hosted products to gain new or improved application functionality without committing to large upfront investments or complex implementations.

Salesforce.com with its hosted CRM products is one of the more recognizable players in the software-as-a-service market. But the on-demand model extends far beyond CRM. Adoption is occurring in many other IT marketplaces as well, including procurement, compliance management, document management, ERP and e-commerce, according the Gartner. The research firm predicts that by 2010, 30% of software revenue will be derived from software delivered via software-as-a-service models.

Among retailers, hosted site optimization and marketing products are a big draw.

Skechers last year chose a hosted search application, for example. The Manhattan Beach, Calif. shoe retailer uses technology from WebSideStory (gained in its May 2005 acquisition of Atomz) that lets visitors search for shoes, and then use sub-categories -- such as size, color and price -- to narrow down the results. Reporting features help Skechers monitor how well search results convert to transactions.

Part of the decision to go with WebSideStory had to do with time-to-market and reliability of the service, says Laura Christine, vice president of direct marketing and e-commerce at Skechers. "We're not a search engine company, we're a company that sells shoes," Christine says. "It would have taken us a year to develop a product like this, and that doesn't include optimizing or improving it along the way."

Online shopping portal Ebates.com also chose a hosted application as it readied for the holiday rush. Ebates uses survey technology from WebSurveyor to poll online visitors and find out how they used the site and what types of promotions are most popular.

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