Software as a Service Seen Sprouting Legs

The market for software piped over the Internet as a service reached an all-time high of $4.2 billion in 2004. That sum was nearly 40 percent greater than the total in 2003, according to IDC.

Like its Web services (define) cousin, software as a service (SaaS), in which applications are piped over the Internet at a customer’s behest, has snowballed in popularity.

Companies like Salesforce.com, Siebel, Grand Central Networks and Rearden Commerce are charging into the market opportunity, proposing automated software delivery methods as an attractive alternative to the traditional method of buying packaged applications and downloading them.

Buyers from small and medium-sized businesses (SMB) and divisions of larger companies are the most frequent customers of software as a service, according to IDC.

There is no doubt that software as a service has become a driving force within the software industry, said research analyst Erin Traudt. “Indications are that customer adoption will continue over the next five years and spending will remain on the rise.”

Traudt said in her report that software as a service will grow steadily at more than 20 percent a year until it tops $10.7 million by 2009. Growth will be driven by new products, customer goals to boost business processes, and new programs to help independent software vendors (ISVs) write software as a service.

Salesforce.com and Siebel are among the first companies to find success with the SaaS distribution model.

Grand Central is another. It offers software integration on-demand.

Rearden launched last winter, professing to be an “Internet concierge” that brings services
to corporate employees on demand.

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