The spectacular rise of SaaS

In advance of Dreamforce, which promises a big announcement from Salesforce CEO Marc Benioff, cloud app adoption numbers indicate a long-awaited industry shift

This is Marc Benioff's time. As CEO of Salesforce, for the last decade, he has been the world's highest-profile pitchman for cloud computing -- starting years before Gartner popularized the "cloud computing" phrase.

In his keynote tomorrow at Dreamforce, the company's annual cloud event, rumor has it that Benioff will be making a major announcement (perhaps related to Chatter, Salesforce's Facebook-like social collaboration platform for the enterprise launched this year). Regardless, he has lots to crow about, including projections that Salesforce will soon be a $2 billion company, up from $1.2 billion in the previous year.

[ Also on InfoWorld: Office 365 pins Microsoft's hopes on the cloud. | InfoWorld contributing editor David Linthicum predicts that Oracle will buy Salesforce in 2011. ]

The segment of the cloud Salesforce leads, SaaS (software as a service), has grown from a tiny sliver of the enterprise software market just a few years ago to 10 percent in 2009, according to Gartner, which predicts that slice will expand to 16 percent by 2014. Even more dramatic is the firm's projection that 85 percent of all new software will be delivered as a service by 2010.

If that sounds far-fetched, consider Microsoft's cloud computing plans. Last March, Steve Ballmer made one of those "betting the company" proclamations about Microsoft's commitment to the cloud, saying that about 70 percent of Microsoft employees would be working on cloud initiatives, and in 2011 that proportion would rise to 90 percent. If you've followed the beta release of Microsoft's hybrid desktop-cloud successor to Office, dubbed Office 365, then you know the company is serious.

On the enterprise app side, SAP is putting more and more emphasis on its Business ByDesign cloud ERP offering, while SaaS ERP pure-play NetSuite claimed 19 percent year-over-year growth in its Q3 2010 quarter. No wonder -- can you imagine a company today licensing and deploying a new ERP system on its own servers? Meanwhile, IBM has entered the cloud business, while Oracle has gone from mocking cloud computing to offering Oracle on Demand cloud services.

Of particular satisfaction to Benioff must be the growing adoption of his Force.com platform, with a developer community that he claims has tripled in size over the past year. Force.com provides a complete, Java-like development environment in the cloud where customers can completely modify and augment their Salesforce implementations -- and third parties can create new applications from scratch and deploy and sell them in the cloud. The Force.com platform-as-a-service paradigm has been validated by Google App Engine and Microsoft Windows Azure, both of which now offer similar plays.

As seen recently in a Salesforce demo, dev and deploy platforms in the cloud make particular sense in vertical markets. Vertical software, targeting everything from small retail chains to medical offices, tends to be crude, inflexible, and expensive legacy stuff. With a rich cloud development platform, small vendors can create vertical SaaS offerings that require zero IT maintenance by customers. Once the migration from the legacy system is complete, customers just fire up the browser and go.

I've been waiting for SaaS to take off like a rocket for years. Now, with an economy that is still crawling very slowly out of recession, the minimal up-front investment, quick time to market, and transparent upgrades offered by SaaS make more sense than ever before. How else do you explain the explosive growth of SaaS in a down market? Benioff deserves his place in the sun.

This article, "The spectacular rise of software as a service," originally appeared at InfoWorld.com. Read more of Eric Knorr's Modernizing IT blog and get a digest of the key stories each day in the InfoWorld Daily newsletter and on your mobile device at infoworldmobile.com.

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