Sorting through software as a service

Software as a service has moved quickly from a peripheral idea to a mainstream phenomenon. While it’s often associated with such applications as customer relationship management (CRM) and such providers as Salesforce.com, there are many other software-as-a-service applications and providers addressing numerous other IT and business needs. As the number of alternatives grows, the time has never been better to take advantage of on-demand software to meet corporate objectives.

Software as a service is not a new idea but an outgrowth of the application-hosting companies and application service providers (ASPs) that emerged in the dot-com era. Although most ASPs and hosting pioneers disappeared because mainstream customers were not ready to adopt their products, software as a service today is capturing broader attention and wider adoption because of two key market drivers.

The first is users’ escalating frustration with the hassles and costs of implementing complex applications. Stories of failed deployments are widespread, and the exponential maintenance and management costs of keeping successful deployments up and running are well documented. Traditional applications also have been inflexible and unable to respond quickly and easily to fluctuating business requirements.

The second key driver behind the recent surge in software as a service is the emergence of technologies that permit traditional packaged applications to be swapped for Internet-based services. Technologies such as service-oriented architecture, Web services and broadband networking are making software as a service possible.

As a result of these key drivers, the market for this application-delivery model is experiencing significant growth. A recent Web survey by Thinkstrategies in conjunction with Cutter Consortium found that almost a third of 118 respondents use software as a service. Another third are considering it, with a majority expecting to adopt it within the next 12 months.

The survey also found that nearly all current users are satisfied with software as a service, expect to acquire additional offerings, and would recommend it to other companies.

With industry acceptance and adoption on the rise, the competitive landscape for software applications is being fundamentally transformed. Several independent providers of software as a service have followed Salesforce.com’s lead and benefited from successful IPOs in 2005, including CRM-application provider RightNow and talent-management-software company Taleo.

The success of independent providers of software as a service has also disrupted established players. Siebel’s fall from atop the CRM and salesforce-automation market and its acquisition by Oracle were direct consequences of Salesforce.com’s onslaught. Microsoft’s recent promise to deliver Web-based software services in early 2006 is as much about keeping pace with independent providers of software as a service as it is an attempt to counter Google’s aggressive moves.

These trends are good for corporate decision makers who are tired of traditional software applications. Intensifying competition will give companies plenty of choices at favorable prices. Now is the time to begin to evaluate and test software as a service in various areas of your IT and business operations to determine how it can satisfy your requirements.