The much-ballyhooed world of on-demand software has arrived, and the question is not if, but when and where software-as-a-service (SaaS) will replace on-premise as the dominant application software model.
Ever since the emergence of salesforce.com as a major player in customer relationship management (CRM), it has become obvious that SaaS is fast-becoming an important business technology.
But equally well-publicized failures at salesforce.com also revealed potential vulnerabilities to this model, and reinforced a common assumption; most observers still believe that SaaS will remain quietly in its corner, targeting the small and medium sized business (SMB) market with point applications such as CRM, supply chain management (SCM) and product lifecycle management (PLM).
Some, however, see the potential for a much larger encroachment by SaaS, and, ultimately, the demise of the on-premise license model.
"On-demand will replace on-premise," Michael Topolovac, CEO of on-demand PLM provider Arena Solutions, flatly predicts.
"Customers will continue to have on-premise for a number of years still, not because it solves problems better, but because of the cost of replacing legacy systems," he told internetnews.com.
If proof were needed that SaaS is here to stay, even on-premise powerhouse SAP launched an on-demand version of its CRM product, mySAP this year.
Stefan Haenisch, VP of CRM Application Solution Marketing at SAP, told internetnews.com the company's decision was driven by "customer demand and pressure."
Haenisch noted that SAP is not targeting the SMB market, but is going after large mid-sized companies and divisions of enterprise-level clients.
Ultimately, however, SAP hopes to migrate those users to a more lucrative on-premise type solution.
Even those who disparage SaaS recognize its merits. It's easy to install; it allows companies to get up and running quickly without having to lay out large up-front fees; customers benefit from more frequent upgrades and better support than they can expect from traditional license-and-install software vendors.