A combination of work, travel and summertime distractions have prevented me from commenting on a series of small, yet significant announcements and activities over the past couple of weeks in the Software-as-a-Service (SaaS) and cloud computing market.

My latest travels started last week at Pacific Crest’s 11th Annual Technology Leadership Forum in Vail, CO, where I met with a series of the investment firm’s ‘buy-side’ clients as a part of its Mosaic program, and interacted with a variety of cloud computing executives and VCs in a SaaS workshop.

Nearly all of Pacific Crest’s clients are concerned about the financial implications of the cloud computing movement on their large-cap investments in companies such as Microsoft, Oracle and SAP on the software side, and IBM, HP, EMC, Dell and other systems vendors on the hardware side. They are also curious about whether Amazon, Google, Salesforce.com, SuccessFactors and other upstart SaaS/cloud companies can sustain their onslaught against the established players. My response to their inquiries echoed the commentary which I published in E-Commerce Times last month, the SaaS/cloud computing movement is already fundamentally changing the the technology industry but doesn’t necessarily mean the demise of the established players. Those legacy players who can adjust their business models to respond to changing customer demands can survive the industry tranformation.

The discussion during the SaaS workshop at the PacCrest forum also reflected the rapidly changing realities of today’s marketplace. While the CXOs and VCs in attendance during the session confirmed that demand for SaaS and cloud computing solutions is accelerating, they also acknowledged that tightening corporate budgets and growing confusion due to vendor proliferation were combining to make it more difficult to succeed and survive. As a result, PacCrest’s staff and the attendees agreed with my prediction that the SaaS/cloud computing industry will see more company failures and greater M&A activity in the latter half of the 2009 and first half of 2010.

Despite these concerns, customer interest and adoption of SaaS and cloud computing alternatives continues to grow. A reflection of the growing interest was last week’s first Cloud World conference in San Francisco which I had the privilege to chair. The event was co-located with IDG World Expo’s OpenSource World and Next Generation Data Center conference. Despite the event happening in a down economy and dead of August, it attracted approximately 2000 attendees.

I chaired a terrific keynote roundtable session entitled, “Assessing the Real Market Opportunities and Obstacles for Making Cloud Computing Mainstream”,  at the end of the first day of the event which included Joe Weinman of AT&T Business Solutions, Sam Charrington of Appistry, James Urquhart of Cisco Systems and the CNET Blog Network, and Timothy Chou of Ming Holdings. The second morning of the conference, I also had a chance to introduce Lew Tucker, vice president and CTO of cloud computing at Sun Microsystems.

Cloud Bursts: Here are a few other news items which crossed my radar-screen over the past two weeks which are worth noting:

• Coupa Offers Its On-Demand Procurement Solution to the Government for Free. Salesforce.com has had a lot of success giving its on-demand customer relationship management (CRM) solutions to non-profit agencies for free. This altruistic move also produces huge benefits to Salesforce.com because it not only generates good PR and goodwill, but also exposes the members of the board and other volunteers who come from the corporate world to the power of Salesforce.com’s solutions. If Coupa can convince the government to take it up on its offer, it could get a tremendous bounce by exposing corporate contractors and others to its on-demand procurement capabilities.
• Fujitsu Consulting Teams with NetSuite to Offer On-Demand ERP Solutions to Mid-Size Enterprises in Japan. NetSuite’s latest partner deal clearly illustrates how rapidly the SaaS market has evolved. This is not your typical, joint press release agreement. Instead, it specifically states, “The plan calls for 500 new customers within three years.” This bold statement wasn’t necessary to bring attention to the alliance, but proves that SaaS is taking hold in the back-office and gaining acceptance worldwide, even in relatively conservative regions such as Japan.
• i2 Looks to Spur Sales with SaaS. Another indication of the rapid growth of SaaS and the disruption it is causing traditional, legacy application vendors is the recent strategy move by i2 Technologies to add SaaS solutions to its portfolio. Like many legacy software vendors, i2 has seen a significant slowdown in sales and sees SaaS as an essential element in resuscitating its business. The success of Plex Systems and other SaaS vendors in the manufacturing sector has proven that companies in this industry are ready to acquire SaaS alternatives to meet today’s tough challenges.
• Microsoft Acquires Office.com URL. Microsoft continues to take a variety of steps to fortify its defenses against the growing competitive threat of Google Apps and other on-demand office productivity solutions. Grabbing the Office.com URL will certainly strengthen its search engine optimization (SEO) and branding efforts. But, Microsoft still has a long way to go to deliver a coherent message and compelling SaaS/cloud computing solutions.

cloud computing Cloud World Coupa Fujitsu i2 Microsoft Netsuite Pacific Crest Plex Systems SaaS Salesforce.com Software-as-a-Service