(It’s always fun to be right about something. In this case it is the following blog entry which was published on Friday, May 19, just three days before RightNow announced its acquisition of Salesnet, a clear indication of the M&A ramp-up which I describe in this blog. And on May 22, Microsoft acquired Softricity. Click here for my more recent blog on the implications of Microsoft’s acquisition.)

A persistent question being asked during this past week’s Software and Information Industry Association (SIIA) Software Summit in San Francisco was when will we see M&A activity heat up in the Software-as-a-Service (SaaS) industry?

Since I wasn’t tethered to my favorite online news service while I was attending the conference, I gave everyone my pre-established view that a decernible uptick in SaaS-oriented acquisitions would occur in the second half of 2006.

I emphasize acquisitions as opposed to mergers because I think the bulk of the deals will be by established players–ISVs, system vendors, systems integrators, business process outsourcers and even telecom carriers–seeking to buy their way into the SaaS market. Although some of the deals will be called ‘mergers’, I doubt many of the transactions in 2006 will be among pure SaaS providers seeking to combine their capabilities to broaden their portfolios and strengthen their competitive positions. I expect this stage of the M&A game occur in 2007.

Unbeknowst to me, three acquisition announcements were occurring this past week that I think confirm my forecast, if not accelerating it.

On Monday May 15, Infor–a provider of supply chain planning, enterprise asset management, relationship management, demand management, ERP, warehouse management, and business intelligence software–announced its acquisition of SSA Global, a provider of corporate performance management, customer relationship management, product lifecycle management, supply chain management and supplier relationship management software. Many industry analysts viewed this as simply a consolidation move by Infor, but it also gives the company a new, on-demand service delivery capability.

On Wednesday May 17, SAP AG announced it is acquiring Frictionless® Commerce, a privately-held, provider of supplier relationship management (SRM) software. Frictionless Commerce offers a mix of traditional, on-premises and new, on-demand services which will enable SAP to expand its mySAP SRM capabilities, especially in the SaaS area, and appeal to a broader assortment of small- and mid-size businesses (SMBs).

The next day, IBM announced it has reached a definitive agreement to acquire Rembo Technology, a privately held software company based in Geneva, Switzerland. Rembo’s software enables organizations to automatically install or upgrade operating systems on thousands of servers, laptops and desktop computers simultaneously. Strictly speaking, this isn’t a SaaS play but a broader move by IBM to strengthen its overall utility or “autonomous” computing capabilities.

In fact, none of these announcements explicitly stated that they were in response to the escalating demand for SaaS. However, all of these moves strengthen the acquirer’s SaaS capabilities, and will push other ISVs and systems vendors to accelerate their M&A strategies in the SaaS arena.

I also expect the major system integration, business process outsourcers and telecom carriers to enter the market by snatching up SaaS providers and enabling technology suppliers in the coming months.