Although Microsoft may be overlooked in the SaaS (software as a service) arena, the company is a leader in this space and views subscription-based software as a way to enhance revenues, a Microsoft official said at the OpSource SaaS Summit 2007 in Monterey, Calif. on Thursday.

During a keynote presentation and a subsequent interview, Cliff Reeves, general manager of the emerging business team at Microsoft, stressed that the desktop and server software giant is a SaaS proponent. Between applications like the company's Office Live platform, hosted Exchange services, and its upcoming Dynamics CRM online package, Microsoft boasts a large contingent of products delivered via SaaS, Reeves said.

The company is "more significant than most of the other players" in the SaaS space, Reeves said. Revenues can increase with SaaS, Reeves noted, saying, "It's tremendously revenue-enhancing for us."

"The notion of delivering software that you pay for when you use it is, in the long run, I think [a way to deliver] revenue streams," said Reeves. He cited as an example of the services model cell phone subscribers who pay their bill based on what they use.

Another opportunity for Microsoft is developing offline clients for SaaS applications, Reeves said.

SaaS is evolving to entail partnering on the provision of services. Reeves cited partnerships such as one between Rearden Commerce, which provides online procurement services, and American Express Business Travel. American Express is providing analytics services as part of the arrangement, said Reeves.

The SaaS conference is taking place right as Cisco Systems announced on Thursday its planned $3.2 billion acquisition of WebEx, which provides online collaboration services via a SaaS model. A WebEx executive had been scheduled to appear on a panel at the conference but was not present.

SaaS is more than just the software being delivered to the customer, said Treb Ryan, CEO of OpSource, which provides hosting and other services for software companies looking to deliver their products via SaaS

A SaaS company needs to think like a Web company instead of a software company, Ryan said. A Web company uses business practices like having more iterative development and focusing on marketing and attracting users, Ryan said.

"Good SaaS companies make it very easy for people to come in and try out their software ... and then focus on monetizing those users," Ryan said.

SaaS helps users with regulatory compliance because the software already is certified for regulations like Sarbanes-Oxley and HIPAA, he said. Ryan also noted the concept of SaaS 2.0, in which SaaS systems can link to other services over the Web to provide such critical capabilities as billing and document management. This allows the SaaS vendor to focus on its own specialty.

On-demand, SaaS is more than just hosting of software, said Ken Rudin, CEO and co-founder of LucidEra, which offers business intelligence services via SaaS. Hosting is about moving software from a customer premise to the software provider's, while on-demand software includes simplicities in setup, usage, and the ability to buy, Rudin said. Rudin served on a panel session about whether SaaS companies are software companies or Web companies.

Pondering the question of which software products might best be delivered as a service, Rudin said, "I ask, which products wouldn’t be delivered better as a service?"

But panelist Mark Binford, business development manager at BMC, dismissed this notion.

"I don't fundamentally agree that every solution is best delivered as SaaS," Binford said.

"On-premise software [and] packaged products are going to be around much longer than any of our careers are going to be around, in my prediction," said Binford. BMC is providing business service management and sees SaaS as a tool to help serve SMBs.

SaaS presents a challenge for the technology sales channel, Rudin said. The channel is used to selling software and making margins, he said. But channel vendors in a SaaS world must switch their focus from selling licenses to providing total contract value, Rudin said. They need to offer value-added consulting services, he said.