Who’s Bullish on SaaS?

Software as a service has momentum, but success isn’t inevitable

All you have to do is glance at this week’s cover to realize that InfoWorld is bullish on SaaS (software as a service). After all, we reserve “The Next Big Thing” label for, well, really big things, and we think that hosted enterprise software, centrally delivered and deployed via a browser, has sufficient juice to qualify.

In the interest of full disclosure, though, I feel compelled to note that we’ve been forecasting SaaS greatness for a while. And we haven’t exactly batted 1.000 in our predictions. In November 2004, for instance, we posed SaaS cheerleaders Mark Benioff and Halsey Minor -- CEOs of Salesforce

.com and Grand Central Communication, respectively -- on our cover and asked the question, “Will these troublemakers put IT out of business?”

We knew even then that we were slightly over the top. But we continue to believe that zero deployment, low cost of ownership, and the prospect of escaping from the upgrade treadmill make SaaS a game changer (see Executive Editor Eric Knorr’s “Software as a service: The next big thing”). Certainly Salesforce.com’s CRM successes has helped to validate that point of view. Yet Grand Central -- which offered integration software as a hosted service -- went belly-up late last year. What happened?

I checked in with Minor, who punted to Brian Mulloy, Grand Central’s president. The problem was that Grand Central couldn’t sell its value proposition to the “three primary stakeholders involved in the purchase: IT management, developers, and line-of-business managers,” Mulloy says.

“A business manager typically doesn’t understand the intricacies of IT infrastructure,” Mulloy explains. “Selling infrastructure to businesspeople is a hard thing to do.” Group two, the IT execs, voiced other objections. “They would hear three things: outsourcing threat (meaning loss of influence or the control required for success), security risk (poking a hole in the firewall), and performance degradation.” As for developers, they rejected being forced to “replace their beloved IDEs or editors” with Grand Central’s tools. “Three strikes and we were out,” as Mulloy puts it.

Despite Grand Central’s woes, Mulloy is charging ahead with another SaaS venture, called Swivel, which enters beta this summer. (Minor is the major investor.) Applying lessons learned -- and IP developed -- at Grand Central, Swivel will integrate with hosted apps such as Google AdWords, NetSuite, and Salesforce.com to offer analytic tools that will help small-business owners and department heads discover “patterns across massive data sets.”

Swivel, like Salesforce.com’s AppExchange, is striving to establish itself as a platform in the cloud. Whether or not it succeeds, it signals the emergence of a new software development and delivery model. Will enterprises embrace apps hosted outside the firewall? Can availability ever be high enough when a million users log on to the same system? These questions remain. But on sheer potential alone, SaaS deserves its 15 minutes of fame -- and a second time around on our cover.