Nay-sayers have leveled plenty of criticism at applications delivered over the Web. The rap has been that customization limitations and integration challenges make software-as-a-service unsuitable for companies with complex application environments.

Mark Bloomquist is not hearing it.

Bloomquist is senior director of customer care at Postini in San Carlos, Calif., which uses Salesforce.com’s sales-automation and customer-service applications. When Salesforce.com’s applications weren’t exactly what Postini needed, Bloomquist tapped into Salesforce.com’s AppExchange developer environment to add new functionality, including a portal for self-service case management, a tool for tracking product enhancement requests and a system for capturing training registrations.

Click to see: Software-as-a-service soars

Salesforce.com has been the poster child for software-as-a-service, increasing its user base to more than 550,000 subscribers since its founding in 1999. Today the CRM vendor is pioneering efforts to reduce the cost and complexity of integrating its hosted applications with other systems by making resources, such as its AppExchange network and Apex programming language and development platform, available to customers.

With many of today's software-as-a-service providers building their systems on a service-oriented architecture, integration of software-as-a-service resources with on-site systems is manageable — particularly compared with some of the integration challenges of legacy client/server applications, says Michael Mankowski, a senior vice president at Tier1 Research. “It's not a no-brainer, but it's easier than calling in Accenture to do an SAP implementation.”

As efforts such as Salesforce.com’s AppExchange platform are refined, more large enterprises with complex application environments are buying into the idea of software-as-a-service. The hosted model continues to grow in scope and acceptance, according to Gartner. The research firm predicts 25% of new business software will be delivered as software-as-a-service by 2011, an increase from 5% in 2005.

Although more large enterprises are getting on board with software-as-a-service, adoption typically still starts at a department level, analysts say. A user signs up for a subscription using a department's operating funds and spreads the word to co-workers, Mankowski says. “All of a sudden it gets viral. That's how [software-as-a-service] sells in an enterprise,” he says.

What is changing is that IT departments, which sometimes were a barrier to software-as-a-service adoption, increasingly are sanctioning the model, won over by its lower upfront costs compared with applications deployed on-premises, faster deployments and more predictable ongoing costs.

Security concerns, which used to be a bigger issue three or four years ago when enterprises weren’t as comfortable with Internet-delivered applications as they are today, are subsiding, Mankowski says. “The security issue has not melted away, but it’s certainly less of an issue now than it was a few years ago.”

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