The start of a new year is always a good time to pull out the crystal ball to anticipate what’s in store over the next twelve months. Here’s what I foresee for the Software-as-a-Service (SaaS) and Managed Services markets.

SaaS Goes Mainstream

In many ways, I firmly believe SaaS achieved mainstream status in 2006 because an increasing proportion of individuals and businesses were willing to give SaaS a try to satisfy their day-to-day software needs.

Much of the momentum has been driven by the explosion of on-demand, consumer-oriented services. As individuals have comfortable taking advantage of on-demand audio, video, storage and security services in their personal lives, they are also beginning to expect the same ease of use and economic advantages in their professional, work lives.

Over the course of the past year, 64% of the people visiting THINKstrategies’ SaaS Showplace who chose to … Read More »

Continuing to push the envelope, Salesforce.com announced its new AppStore today, and boldly entered the on-line payment transaction management business.

Building on the momentum of its successful AppExchange platform and clearinghouse for Software-as-a-Service (SaaS) providers, Salesforce.com has taken the next step in becoming an end-to-end mechanism for independent software vendors (ISVs) looking for help developing and marketing their on-demand solutions.

In October, Salesforce.com unveiled a new Apex developer’s toolkit at its Dreamforce conference. Apex is aimed at making it easier for customers and partners to customize Salesforce’s applications.

Now, Salesforce.com is making it easier for its AppExchange partners to sell their solutions via the web. The new AppStore will include a two-tier referral program and automated checkout capabilities. ISVs can choose between a standard or premium referral service. The standard service includes search engine optimization and other marketing services for a 10 percent … Read More »

On November 30, 2006, Business Objects announced its intention to acquire Nsite Software, Inc., a software-as-a-service (SaaS) provider of channel, quote and proposal management applications that has been shifting its focus towards developing a library of enabling tools for SaaS developers.

Like a growing number of SaaS providers, Nsite has been migrating from a product-centric to a platform orientation. This shift has been inspired by Salesforce.com’s success with its AppExchange initiative which has clearly shown a strong platform can also become a magnet for a potent partner ‘ecosystem’ that can exponentially expand a SaaS provider’s market reach.

Business Objects’ acquisition of Nsite enables the business intelligence software vendor to leverage Nsite’s on-demand application platform and engineers to accelerate its internal development efforts. It also gives Business Objects access to approximately 27,000 Nsite subscribers.

Like many established, publicly-traded independent software vendors (ISVs), Business Objects … Read More »

Some industry observers and independent software vendors (ISVs) suggest that Software-as-a-Service (SaaS) is just another way of delivering software. They use this argument to discount the significance of the SaaS movement and suggest that delivering software as a service will become commonplace in a few years.

What these observers and vendors overlook is the structural impact this trend will bring to more than just the software industry. As a consequence, traditional companies will be forced to redefine how they look at software and services. In fact, as I suggested in a previous blog we are already seeing a breakdown in the line of demarcation between the software and business services industries.

The first indication of this phenomena came in August when ADP acquired software services company Employease. This deal brought together ADP’s well-known payroll services with Employease’s less-known, but rapidly growing, on-demand … Read More »

One of the common misconceptions about Software-as-a-Service (SaaS) is that it can’t be easily integrated with legacy applications.

While this myth has been quietly disproved by various SaaS players over the past year, one of Salesforce.com’s latest initiatives lends a louder voice and provides a more powerful proof-point that SaaS/legacy application integration should no longer be a barrier to success for organizations who want to migrate from on-premise to on-demand software.

On November 27, 2006, Salesforce.com unveiled its latest innovation, ApexConnect, a new set of on-demand integration tools that build on the success of its AppExchange partner program and the promise of its new Apex development platform.

ApexConnect adds a new ConnectOut feature to the Apex development platform which permits the industry’s first on-demand outbound messaging API. Salesforce.com has kicked off the ApexConnect initiative with a new ConnectOracle API for integrating Salesforce with … Read More »

On November 14, Dell Computer announced its intention to acquire Scottish-based ACS in a deal which signifies that Dell is serious about expanding its business beyond hardware into services.

Headquartered in Glasgow, ACS was founded in 1990 and now has operations in Edinburgh, London, Paris and India. The privately-held company generated pre-tax profit of $3.7 million on revenues of $21.88 million in 2005. It boasts a staff of 200 and is the largest Microsoft partner in Scotland.

Dell has been increasingly pressured to match IBM and HP’s substantial service offerings in order to compete for corporate business. Historically, Dell has preferred to depend on third-parties, such as Unisys, to deliver its on-site services so it can stick with its low-cost product strategy. The acquisition of ACS represents an incremental step in the direction of delivering more in the way of services as … Read More »

It is popular in the Software-as-a-Service (SaaS) movement to berate the established independent software vendors (ISVs) as doomed to inevitable extinction. The ISVs face overwhelming challenges as they attempt to convert their on-premise applications and entrenched corporate cultures into on-demand, service-oriented, net-enabled companies.

The established ISVs have become easy targets for Marc Benioff at Salesforce.com, “The End of Software” author Tim Chou, and a wide array of lesser-known industry pundits. In a world in which the difference between right and wrong becomes more indiscernible everyday, software professionals and industry “experts” are still happy to pick sides in an escalating argument over who will win or loss in the rapidly evolving on-demand bazaar.

While I admit to fanning the flames a bit by pointing out in my writings and talks the major challenges facing established ISVs–rearchitecting their software, restructuring their revenue models and … Read More »

The past week’s SIIA On-Demand Conference served as another opportunity for the rapidly evolving Software-as-a-Service (SaaS) industry to take stock of where it stands and where it is headed.

One indication of the rapid maturation of the SaaS movement was the lack of discussion or debate about how to define what SaaS stands for. In fact, Brian Jacobs of Emergence Capital–an active investor and proponent of SaaS companies–skipped a slide in his presentation during the first morning of the two-day conference which included a definition of SaaS.

Just as the debate of definitions has pasted, so too has any dispute over whether the SaaS market is for real. The major systems vendors–IBM and HP–lent their perspectives about the forces shaping the SaaS business. The general manager of Microsoft’s .NET platform strategy, Cliff Reeves, outlined how his company is responding to escalating demands … Read More »

On October 25, 2006, BT announced its intent to acquire Counterpane Internet Security, a pioneer in the managed security services (MSS) market.

This is the second major acquisition of a managed security service provider (MSSP) in the past 90 days. The previous acquisition was of ISS by IBM. It is also the second acquisition of a managed service provider (MSP) by an offshore player following Cognizant’s acquisition of Aimnet Solutions in September.

While most people view BT as a major carrier, it is also a major outsourcer. So, its acquisition of Counterpane, along with IBM’s acquisition of ISS, indicates that the major outsourcers now view managed services in general and MSS in particular as a critical component of their portfolios going forward.

I perscribed this approach in a NetworkWorld commentary earlier this year. At that time, I suggested the major outsourcers had to … Read More »

As the Software-as-a-Service (SaaS) market gains momentum, SaaS providers are trying to differentiate themselves in the increasingly competitive marketplace by repositioning themselves as ‘platform’ vendors rather than point-solution providers.

Salesforce.com has gained the most attention moving from a product to a platform position with the success of its AppExchange and the unveiling of its new Apex programming language.

This week, NetSuite responded by unveiling a new platform of its own, SuiteFlex, to expand its presence in the SaaS market. While Salesforce.com’s partners have primarily focused on expanded the array of horizontal applications that can be linked together on the AppExchange, NetSuite’s SuiteFlex initiative is aimed at delivering a new generation of vertical market applications.

The SuiteFlex platform is built upon NetSuite’s SuiteScript programming language, which was unveiled months before Salesforce.com’s Apex, but has generated little attention or support. NetSuite is enhancing the SuiteScript … Read More »