Pioneering vendors of software-as-a-service (SaaS) have spent the better
part of a decade defending their model against purveyors of traditional
They have made their point, perhaps to their own chagrin.
As the market for SaaS has opened up to enterprise-class customers and
beyond customer relationship management (CRM) to a fuller array of
solutions, traditional software vendors, such as SAP (Quote, Chart), IBM
(Quote, Chart), Oracle (Quote, Chart) and Microsoft (Quote, Chart), are beginning to see the wisdom of offering software on demand.
Given their resources, some say, those companies are poised not only to
participate, but even dominate the SaaS space.
Joshua Greenbaum, principal analyst at Enterprise Applications Consulting,
told internetnews.com that even a market-leading pure-play SaaS
vendor like Salesforce.com (Quote, Chart) cannot match the level of
systems integration that an SAP or Oracle can provide their customers.
He noted that Siebel founder Tom Siebel had admitted that his company could
not match SAP and Oracle in terms of integrating CRM with other back-end
“They hit a wall,” said Greenbaum. “Both [SAP and Oracle] have this broader
depth of functionality and broader view of an integrated enterprise, so
without a doubt, Salesforce is very vulnerable,” he said.
The market opportunity is there, and traditional vendors are already
beginning to take part.
The many flavors of SaaS
More enticing yet for traditional software vendors, SaaS is now gaining
acceptance in the enterprise beyond CRM and other partner-related solutions.
Pure-play SaaS vendors like nSite, with a business process management
solution, Kana with on-demand knowledge management, and Agile (Quote, Chart) with product lifecycle management tools on demand, are
beginning to encroach on the traditional bastions of on-premise enterprise
Even such sacrosanct functions as security are being addressed by companies
like Qualys and IBM.
This is happening because customers see an opportunity to reduce both cost
Philippe Courtot, chairman and CEO of Qualys, has seen the evolution first
hand. His company boasts 22 of the Fortune 100 as customers.
“IT departments are under huge pressure to do more with less resources,” he
Denis Pombriant, managing principal at Beagle Research, noted that SaaS
vendors have not only reduced the cost of these solutions, but also the risk
of purchasing and maintaining them.
On-demand software is “a paradigm that reduces cost and risk for any company
that depends on software to do its business,” he said.