Software as a service hits sweet spot

Vendors championing the use of software as a service are claiming an 'alignment of the planets' in 2006 which will see more businesses and consumers than ever signing up for their vision.

Universal broadband and near-ubiquitous wi-fi, which is gathering pace in many metropolitan areas this year, goes some way to laying the foundations. And even the arrival of in-flight wireless means business users with an always-on expectation may be better served by using online applications, according to the pioneers of on-demand software.

Perhaps the most vocal advocate of the movement is Salesforce.com founder and CEO Marc Benioff, who believes consumers and businesses will eventually do away with shrink-wrapped software altogether.

Speaking to silicon.com, Benioff said his company's part in moving software online is seeing "tremendous momentum" - particularly with the recently launched AppExchange hub which currently offers around 200 on-demand applications.

But it won't happen overnight and he concedes "there is still a lot of software being bought out there".

"In our industry people always overestimate what you can do in a year and underestimate what you can do in a decade. We've only been alive as a company for seven years. We've not even gotten to our first decade yet and we've come a long way."

Philippe Courtot, chairman and CEO of on-demand security vendor Qualys, told silicon.com that he has made a $1m bet with "a very big name in the industry" that software as a service will have replaced traditional enterprise software in five years.

"Software as a service is a very disruptive technology," said Courtot.

Benioff says all the signs - many of which are covered by the current phrase du jour of Web 2.0 - point towards software as a service, citing Google's purchase of Writely as an emerging threat to the very core of shrink-wrapped software's hegemony - namely Microsoft Word and the Office applications. He claims businesses will ultimately benefit from trends developing in the consumer space.

"We have to show what's possible and we need to show people how they can move away from these old client-server companies," Benioff told silicon.com.

The ease of implementation which on-demand vendors tout will also be the factor which keeps them honest and competitive, said Qualys' Courtot - because if it's easy to switch on, then it's just as easy to switch over. Courtot said this contrasts starkly with the large enterprise software vendors. "Once they've got you, they'll milk you," he said.

Evan Goldberg, chairman, founder and CTO of CRM vendor NetSuite, is another relying on software as a service hitting the big time. He told silicon.com he believes all applications will eventually be accessed online.

"I have a very big vision of where software as a service can go," said Goldberg, adding his vision is for the industry as a whole - way outside just the areas in which NetSuite will be involved.

"Once you have a lot of people using not only CRM, payroll, HR but also software such as word processors and calendaring online that's going to put a big dent in the shrink-wrapped software market."

"I don't know how long it will be before people stop buying software like Photoshop in a shrink-wrapped box but it will happen," said Goldberg, warning vendors they must wake up to this movement.

Among the drivers for this are the availability and increasing reliability of broadband.

"People are far more confident in their broadband. It's not yet quite telephone reliability but it's close. And then you have wi-fi all over the cities and people using WAN cards in their laptops. And even planes now are getting broadband, so people can work anywhere," said Goldberg.

The benefits of hosted models, he said, also throw up massive benefits in terms of back-up business continuity, which advocates claim far outweigh the risks of occasional downtime.

Salesforce.com weathered heavy criticism - particularly from its rivals - for the downtime it experienced around the turn of the year when customers were cut off from critical applications for hours on end. But Benioff remains bullish, even though this past week again saw the company run into problems of downtime.

"Are we going to have bumps in the road? Absolutely," Benioff told silicon.com. "I think people already knew that computers go down. But we do a pretty good job over time and it's all about what the customers say, not what other companies want to say about us."

Salesforce.com customer Eddie Myers, general manager of Payment Processing, told silicon.com he's keeping faith in the on-demand model.

"Sure the downtime was a pain. But I'm not about to throw the baby out with the bath water," he said. "I can understand the debate but I don't think it's an issue."