I had the privilege this week of participating in an interesting webinar sponsored by Makana Solutions regarding the sales implications of Software-as-a-Service (SaaS) and other subscription services.

Tom Wilson, of the Wilson Group; Makana’s founder, chairman, and CEO Liz Cobb; and I discussed how the sales skills and processes differ in the on-demand services world from the traditional packaged product environment. Specifically, on-demand services come at a lower price-point which necessitates higher volume sales to be successful. This requires a transaction oriented sales process and telesales skills, rather than the long salescycles and highly personalized approach of traditional legacy software sales. Therefore, restructuring the sales process and retraining or restaffing the sales team is critical to transitioning to the SaaS and subscription service model.

Similarly, the support function also changes in the on-demand world. Rather than rely on technical support to react to problems implementing and maintaining software, customers expect their on-demand solutions to be easy to deploy and administer. They also expect their SaaS providers to ensure the availability and performance of their online applications, and to proactively assist them in utilizing the solutions and continuously enhance the solutions to make them more useful and easy to use.

Mikael Blaisdell explores these differences in greater detail in his recent blog, “SaaS & The Ghost of Computing Past.” It is worth reading his perspective which he will also discuss during his presentation at SaaScon.

As Treb Ryan of OpSource likes to say, in order to be successful in the SaaS business, vendors must stop thinking like software companies and start acting like web companies.

I’ve referred to this transformation as an ‘inversion’ process because it forces most established software and technology companies to re-think how they operate and how they go to market. It also will force them to replace many of their staff with a new breed of people that view their jobs and their customer relationships differently.

It is for these reasons that many established players will face traumatic changes in 2008 as customer interest and adoption of on-demand solutions will become as mainstream as ecommerce.

Gartner is predicting that economic and organizations forces will combine to fuel greater outsourcing, with SaaS gaining the greatest traction as a viable alternative to traditional IT and business process outsourcing (BPO). Gartner’s market assessment echoes my reasons for forecasting strong growth for on-demand services in 2008.