Everywhere you turn, another company pops up offering SaaS (software as a service). Inspired by the success of Salesforce.com,
SaaS vendors are hoping customers large and small will get the message: Browser-based, pay-as-you-go applications mean fewer
servers for your IT department to maintain and less capital to shake loose from the CFO for software licenses and hardware.
For whatever such estimates are worth, IDC recently forecasted that worldwide spending on SaaS will reach $10.7 billion by
2009. But there’s so much SaaS running around already that we couldn’t help but wonder: Could you run a business entirely
on hosted offerings?
That somewhat playful question was the genesis of this buyer’s guide to SaaS -- although we already knew the answer. Healthy
enterprises need to develop their own unique applications, and any modern IT infrastructure needs to be fully integrated in
a manner that can’t be achieved with SaaS solutions today.
But an urgent need to stop piling cost and complexity on IT is sowing the seeds of change. Although enterprises may not be
replacing effective, large-scale systems with SaaS alternatives, the SaaS option suddenly becomes perfectly viable when it
comes to adding new functionality. And, as Salesforce.com discovered, SaaS can be particularly successful at replacing in-house
or off-the-shelf software that has failed miserably.
In our survey of hosted software offerings, we’ve divided the SaaS universe into four parts: back-office applications (ERP,
purchasing, HR, and so on), messaging, integration, and CRM.
These rough groupings, however, hardly cover the whole territory. For example, hosted versions of Mercury’s software quality, performance, and availability solutions continue to increase in popularity. Meanwhile, Web analytics, another monitoring technology, enjoys more traction as a hosted service than as server-based software. Recently, InfoWorld reviewed three of the leading hosted content management systems, revealing a surprising depth of functionality. SaaS search and collaboration
are also proliferating. BPO (business process outsourcing) vendors provide not just software but the staff to operate it as
well. And we haven’t even touched MSPs (managed security providers), a world unto itself that we’ll cover in an upcoming issue.
The bottom line is that a growing number of companies are choosing the on-demand model instead of packaged software. True,
no enterprise would switch all its systems to SaaS overnight. But the success of Google’s Gmail proves that the hosted model
is viable even for categories such as desktop productivity apps, which were once the exclusive domain of commercial off-the-shelf
vendors. Application by application, during the coming years enterprise IT will rely more and more on hosted services that
deliver deep functionality with very little maintenance at a very low cost of entry.
-- Eric Knorr
Back Office
On the face of it, you might think the ERP, supply chain, and database applications your company relies on for essential operations
would be the last things you’d want someone else hosting. Yet that’s exactly what big players such as Oracle, SAP, and Siebel
are doing for as much as 8 percent of their customer bases.
Oracle has been particularly focused on this space, with hosted versions of its own software available under the Oracle On
Demand brand and investments in NetSuite and Salesforce.com. IBM has jumped into the back-office SaaS market as part of its
On Demand Business strategy, forging partnerships with hosting players such as Adexa, HRsmart, Intacct, and Peopleclick. IBM
also acquired Corio, which provides hosted Oracle, PeopleSoft, SAP, and Seibel services. Meanwhile, SAP and Siebel offer SaaS
packagings of their respective applications.
In the ERP space, second-tier players such as Intacct and Lawson Software offer hosted versions of their own applications,
whereas third-party service providers such as NaviSite and USi host ERP software solutions from the top-tier vendors.
Employease is a leader in the HR space, competing against Peopleclick and Ultimate Software. The latter concentrates on workforce
acquisition.
Arena Solutions is a leader in PLM (product lifecycle management). Ketera specializes in e-procurement. And there’s a slew
of vertical players as well, including Kintera for nonprofits and CaseCentral for law firms.
Hosted back-office applications are attractive for SMBs that lack the IT expertise to build and maintain complex in-house
systems. But they are making inroads into large enterprises as well.
“We’re seeing a lot of hybrid deployments that use the SaaS model to get a new team up and running quickly or to fill in gaps
in their in-house application. They look for easy integration with the in-house function,” says Amy Konary, director of software
pricing, licensing, and delivery at IDC.
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