In a not terribly unexpected move, Microsoft has announced plans to offer hosted versions of its Exchange server and SharePoint software, as well as a product called Office Communications Server and a SaaS version of security tool Forefront. The move is a response to increasing competitions from on-demand rivals, such as Google Apps, and is sure to be an interesting addition to the array of SaaS offerings on the marketplace.

The SaaS offerings will be available only to customers buying 5000 or more seats, said Microsoft product management director Eron Kelly in a PC World article. The same article pointed out the interesting challenges Microsoft faces in making these sorts of SaaS forays, given that Microsoft wants to avoid competing with its partners, which primarily target smaller companies, but by targeting larger organizations may antagonize resellers and systems integrators that prefer on-premise software due to greater upfront revenue and upsell opportunities.

Mary Jo Foley of ZDNet reported on an additional announcement by Microsoft that particularly targeted competition by Google Docs, which is Office Live Workspace -- a new online feature of MS Office that allows for document collaboration and online storage by consumers and small-business users. Office Live Workspace is not truly a SaaS offering, given that anyone using it must install Microsoft Office rather than access it through a Web browser, but it will reportedly allow for online collaboration -- one of the benefits played up by Google for its Google Apps. Foley reported that Microsoft is taking sign-ups from prospective beta testers starting today, with the beta scheduled to launch in about a month. The service will be free.

CRN's Steven Burke wasn't buying the hype at all and today posted an article on five reasons Google Docs beats Office Live Workspace, lambasting the Microsoft option for not allowing document creation and editing within a Web page, among other reasons.

To add another twist to the growing SaaS competition in the word processing and office document space, Adobe Systems announced that it would buy a company called Virtual Ubiquity, which developed the Buzzword word processor. The tool works online or off, in a browser or on a desktop, as Andy Patrizio of InternetNews.com reports.

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SaaS blogger Bob Warfield made a bold statement the other day. In an interview with Concur CEO Steve Singh, he suggested that conventional software is inherently built on bubbles, whereas a SaaS model would have moved forward quicker without the ebbs and flows that plague old school ISVs.

Not surprisingly, that raised a few eyebrows. ZDNet's Steve Wainewright was taken aback by the statement, pointing out that the implication for conventional software then becomes akin to that of subprime loans -- great idea during boom times, but somewhat less awesome when the music stops. But then again, he conceded, there were some strong arguments in favor of this view.

Indeed, there's a common sense aspect of SaaS that tends to hold true during boom and bust alike: Flexibility is very, very nice. Buying a seven-figure solution that is two sizes too large and hoping you eventually grow into it is a risky move any day of the week.

Furthermore, it's money up-front, not just for the license but whatever implementation hassles your consultants plan to wring out of you. There's a reason Larry Ellison doesn't like the low-profit SaaS business, and that in and by itself is a good sign as far a cost-conscious small and midsize businesses should be concerned.

Having said that, is SaaS an inherently stronger model that is destined for eternal greatness by inherent design? Nope. There's a reason SAP has an iron grip on the S&P 500 crowd, and that isn't just because of size although that certainly is a factor (anyone want to run GE's global payroll using SaaS?)

The nature of the business plays in as well. A midsize firm specializing in the latest personal electronics gadgets that chase fickle customer tastes need maximum flexibility. They drop the ball once in a while, but next year they may have the next Must Have holiday item. These guys need to be able to turn on a dime, whereas a manufacturer of canned corn can be fairly certain their business won't fluctuate much in terms of workforce, product innovation, economic cycles and so forth. Why would they spring for a SaaS solution when they can call a local ERP vendor, eat the initial cost but then run on the same system for 15-20 years with bare-minimum, in-house maintenance?

The point I'm trying to make is that it's easy to get caught up in the high-speed pacing of the tech sector and have that become the norm, while the majority of real-life companies that actually use the stuff just don't move that fast nor have any desire to do so. Of course, a big percentage of them are likely to benefit from a full or partial SaaS approach nonetheless, but in order to get there they need to be convinced -- which is a completely different discussion.

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IDC has released a study on the emerging SaaS channel in which it concludes that Software-as-a-Service may have a serious impact on traditional partner revenue streams.

In the press release, senior analyst Erin TenWolde said, "Two big wrinkles for partners are obviously the subscription revenue stream associated with SaaS solutions as well as selling 'virtual' products where there is nothing to physically ship, implement, or keep on the shelf. This is going to drastically change the way partners and SaaS providers engage with one another in the future."

Darren Bibby, also a senior analyst, predicted a shift of technology-centric solution providers to business process consultants and the emergency of new partner types.

The study also concluded that nascent partnering models still exist in the SaaS ecosystem but that activity is occurring on a trial and error basis, that VARs face potentially large challenges in securing revenue in resale scenarios, and that new solution providers will emerge to develop discrete expertise in niche areas.

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There's still some debate in the blogosphere about SAP's grand A1S-turned-Business ByDesign SaaS gamble. On one hand, the mere fact that SAP is seriously looking beyond the safety of the old, familiar cash cows in the upper end of the market using a SaaS model to chase smaller fish is ample evidence that the model isn't a passing fad.

As mentioned yesterday, the general feeling is that SAP BBD is a solid, well-rounded product that just might give Larry Ellison, Benioff and other players in this space a bit of headache. ZDNet's Phil Wainewright said SAP gets it. Zoli Erdos predicts world domination.

On the other hand, SAP's track record for the small and midsize market is considerably more lackluster than their S&P 500 customers.

Indeed, a few years ago SAP made a big deal about its commitment to reach a lofty 100,000 customers by 2010. Naturally, that means the bulk has to be made up of SMBs. It's nearing the end of 2007, and they're what, 60,000 customers shy of that goal?

Furthermore, let's not forget that SAP dipped its toe in the SaaS water last year with its decidedly ho-hum CRM On-Demand product. While technically not bad, I have yet to see even SAP people do backflips over how that turned out.

They're not entirely letting go of their old ways either. Note that they put a minimum cap if 25 users for BBD. Why? Could it be to prevent cannibalizing Business One?

That cannibalization issue should be taken seriously. Let's not forget that SaaS is a very disruptive model, completely different from what they usually work with. On a side note, the resulting churn, increased marketing costs and customer retention challenges that comes with the territory could have a major impact on SAP's bottom line to boot. A big SAP failure could become a heavy chill for the SaaS sector as a whole.

But let's not paint doom and gloom. Again, the product itself seems reasonably strong, weak UI and all, and the $400 million SAP plans to spend singing SaaS praises should make the next few years a very interesting time for SaaS vendors and customers alike.

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Today was the big day for ERP giant SAP, which has officially unveiled its new product Business ByDesign, formerly known as A1S. According to a report by Computerworld, SAP states it would invest $400 to $550 million by the end of 2008, and CEO Henning Kagermann called the unveiling of the product "the most important announcement I have made in my career."

Business ByDesign is to be priced starting at $149 per user per month, and the service is targeted at businesses with 100 to 500 employees, and it is expected to be widely available by late 2008. Computerworld has more.

From experts who visited the demonstration, reaction was generally optimistic. ZDNet's Phil Wainewright said that SAP appeared to be on the right course and to understand SaaS, but that risks still remained in terms of customization and cannibalization. Also of ZDNet, Michael Krigsman agreed with general consensus that SAP has a lot at stake and that the product represents a shift in SAP's thinking, but advised customers to hold off on purchasing until the system has more of a track record.

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Drawing from years of experience in the field, including time as a consultant and then time working with Salesforce.com, NetSuite, and Siebel, LucidEra CEO Ken Rudin has a lot to say about Software-as-a-Service and the latest developments in the business intelligence field -- including upcoming SaaS efforts by enterprise software giants Business Objects and SAP.

LucidEra offers SaaS-based reporting and analysis tools that can create dynamic, efficient reports that pull data from multiple areas of the business, eliminating the need cut and paste reports from different spreadsheets to bring the data together. Although many companies try to do this themselves, Rudin likens the effort to managing your own nuclear reactor in the basement when all you want is electricity rather than choosing to pay a utility company to manage the reactor for you. He states that by handling this business need through a SaaS approach that rather than paying a team of consultants hundreds of thousands of dollars for a six-month effort, companies could sign up at 9am and be up and running by noon -- clearly an improvement for many types of companies.

Rudin took some time from the Dreamforce conference to share some thoughts on current trends in the SaaS market and the efforts of the giants in the ERP industry to move to the SaaS world.

Concerning the upcoming SaaS offerings of companies like SAP and Business Objects, do you think these SaaS offerings be the panacea that those companies hope it will be as far as penetrating the mid-market?

You cannot do what every enterprise company ends up doing, which is taking their technology that's on premise and then putting it on their own servers with a web front-end then call it SaaS. In most cases, that original software is not designed to be delivered as an on-demand solution. Trying to move from on-premise to on-demand is not just an exercise in relocation of software. On-demand is much more than that. It's about making a solution that is easy to set up and easy to use. If you take Business Objects, for example, which is an incredibly complex piece of software, just physically moving it doesn't make it easier to set up and easier to use. Now you just have a solution over the web that's hard to set up and hard to use. So the on-demand model is not just about relocation of service; it's about a whole mindset that has simplicity and speed as core tenets and you don't get that by just moving the data and taking a traditional product and putting it online.

Every company probably has to do that I'd recommend that every enterprise do that as a first step. No, it doesn't work, but the companies often need to prove to themselves that it doesn't work. They have to go through this process of taking what they've got, hosting it, and then thinking much deeper about what they really need to do as a company. Truly it just doesn't work. It's like taking a car, putting a propeller on it and calling it an airplane.

How do these developments affect the internal environment of the company, and can you comment on whether companies like SAP and Business Objects run the risk of product cannibalization?

The harder issues are the kind of cultural/emotional issues within the company. Probably the most challenging is the fear of cannibalization. You've got these big companies that sell $500,000 licenses and then they start to worry when you talk about instead signing on customers that pay a half million upfront, you're going to sell contracts that charge $70 per user per month. They start saying, "we'll avoid that by taking our traditional enterprise product and we'll target that to large enterprises and so we won't see cannibalization there. What we'll sell to now for on-demand is the mid-market. Then we'll see increased and not cannibalized revenues to the mid-market."

The flaw is that although you may say the above, customers seem to stubbornly resist agreeing to your fairly arbitrary categorization there. You'll eventually get some large company looking at your on-demand product and saying can we use that one? Then you're back to the idea of there goes your million dollar deal to your $70 per user per month deal. Then you also have the issue with on-demand that A) you don't get cash upfront, and B) equally as troubling is if you're a public company, you want to realize revenue. With traditional software you can recognize everything upfront, but if you're selling a subscription-based model, you can only recognize revenue pro-rated over the life of product's contract. You may find your sales guys going, "there goes my commission," and end up creating a civil war inside the company.

Is there a risk that these products are really just a bait-and-switch with these companies having an ultimate goal of migrating customers to more expensive on-premise software packages once they're hooked into the SaaS products?

I've seen this happen again and again. You can't tell enterprise customers that they're not allowed to buy on-demand software. Then you end up having companies say "Why don't we do it this way? Let's sell them on-demand but it doesn't have the same level of features and functions. Then they'll get started wtih that, and then when they're ready to go for the real solution, we sell them the on-premise solution." That gets the customers on the road to lots of consulting dollars that they'll have to spend, lots of implementation and consulting fees. It really is bait and switch; they try to sell the easy thing, then as soon as possible, convert the customers to the traditional solution.

But it doesn't really work. I don't know that I've ever seen a customer start with on-demand then move to on-premise. Actually, there is an on-ramp between on-demand and on-premise, but unfortunately it goes the other way. Most start with on-premise then they like the value they're getting out of it but they prefer value without complexity, so they move from on-premise to getting it on-demand. I don't know any companies that have started on-demand and gone the other way.

For SAP and Business Objects, would you predict that they will ultimately find the SaaS part of the business to be too expensive to run with nominal return as compared to the profit margins of on-premise software?

That's a troubling thing because in the early days they can kind of do it by saying, "this is a hot market so we need to invest." They spend a lot of money on this and the data center and they really treat it as a science project, saying "we'll see what we can learn and we'll do this for a little bit." Then they get minimal recognizable revenue, then they start saying, well this is interesting so how long do we want to keep this little science project going? Should we try to spin this off or sell this to somebody? Then they have a bad quarter and decide we have to really retrench so let's focus on our core business.

Look at Business Objects. Their on-demand division is one of five divisions and it's generating almost no revenue -- so little revenue that they haven't ever reported how much revenue it is. As soon as they see their core query and reporting revenue dry up a bit. Business Objects announced its first on-demand offering in March or April of '06. If you look at the quarterly analyst call they do, initially out of the maybe 30 slides, maybe five or six of them were about the new on-demand initiative. The next quarter, there were about one and a half slides on it. Then they had a bad quarter and went to single bullet item on one slide two quarters later. They were already starting to pull back from it, because all the analysts on the call were saying, "you're seeing some erosion in the core query and reporting business. Is that because on-demand is starting to cannibalize the other business?"

It's a very, very difficult challenge. I think that their having to face these challenges creates great opportunity for companies like LucidEra to take that nuclear reactor out of the basement and let us manage it for you. All we need is access to your data and then we do all the heavy lifting.

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More interesting SaaS articles and announcements were all over the media today, including a piece by Ben Woodhead of Australian IT analyzing Salesforce.com's apparent dream of becoming the underlying platform for Software-as-a-Service using Force.com and the Apex language. In addition, Yahoo! announced plans to buy open source collaboration company Zimbra for $350 million, a move that ZDNet blogger Phil Wainewright called smart and speculated whether Yahoo! might be going after Exchange rather than Office with the move.

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Dave Rosenberg of InfoWorld posted a blog entry following the Dreamforce event in which he reflected on SaaS vs. Open Source. He pointed out a difference between companies that form a "community" vs. those that have an "ecosystem." Clearly open source has much more of a community among developers and SaaS-delivered software is more of a service that is consumed by users. Matt Asay of CNET also commented, saying that "Open source offers the better promise of ecosystem. Ergo, open source wins." But is there even a battle between open source and SaaS? Don't most companies choose SaaS because it's simple and easy to set up, whereas open source often requires configuration and customization? One might think the two served different purposes and aren't really at war at all. As Rosenberg even concluded, a good majority of "new school" SaaS companies have built their sites on open source.

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CRM giant Salesforce.com kicked off its annual Dreamforce user conference yesterday, and as expected, the show is spawning numerous interesting SaaS announcements. For starters, ebizQ has posted the most interesting new product announcements. Have a look at the following:

• Informatica Integrates Data-as-a-Service for Salesforce Customers
• Business Objects Offers BI SaaS
• Fujitsu Consulting Acquires OKERE for CRM SaaS
• Mulesource to Offer Integration-as-a-Service
• Boomi On Demand Rolls Out on Salesforce.com's AppExchange

IT analyst Guy Creese of the Burton Group posted a short report on his blog commenting on some interesting apps, including Business Objects and SpringCM. He also makes the observation that another advantage of SaaS in addition to the most frequently cited pay-as-you-go model and browser access is "being able to buy pre-built complementary applications offering functionality that used to demand hiring a systems integrator."

Giving some perspective on the company's current thinking, Salesforce.com VP Adam Gross spoke with Darryl K. Taft at eWeek about the conference and had some things to say about industry resistance to multitenancy as well as Microsoft's resistance to the SaaS model. He also responded to criticism of the Apex language. More here.

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An article from InformationWeek examines the virtual appliances market, an idea promoted by virtualization pioneer VMware. The article points out that virtual appliances are software bundles that contain many server-like functions without any hardware, and then an application and operating system are set up to run inside the appliance.

The virtual appliance idea targets many of the same customers as SaaS, and the article points out that some companies may prefer the virtual appliance route since it would keep data in-house. Big vendors are starting to sell software to run in a VMware environment and VMware is boasting more than 2,500 virtual appliance downloads per day. But will these appliances rival SaaS? Time will tell.

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Silicon Valley's Trend Micro Inc. is a specialist in digital security products. At the end of July, the company announced SecureCloud, a business security platform delivered through Software as a Service. The company had previously specialized in on-premise software, although it also offered TrendSecure, a consumer SaaS security platform. To get more information about Trend Micro's intentions, we spoke to John Maddison, general manager of network security services at Trend Micro.

What inspired Trend Micro to release a product through SaaS?

Maddison: About five years ago, customers started asking if we could provide a service rather than a piece of software for specific applications. Second, the latest generation of threats -- which we've terms web threats -- are so rapid and the need for updates is so rapid that you need a service
infrastructure and traditional updates won't work.

How does SecureCloud integrate with onsite email servers?

Maddison: SecureCloud provides the first line of defense. It's a kind of a gateway in the cloud that filters and scans and provides a security mechanism for email traffic, then passes email traffic on to email services. About 92 percent of email traffic is gone by the time it reaches the reader. It's the first line of defense against attacks.

How can companies be sure of the security of software delivered through SaaS when they don't host the software?

Maddison: Years ago, that was a big concern, but attitudes have changed a lot because some huge companies are using or considering software-as-a-service. Companies have a strict policy in place with operations teams and with anyone who comes in contact with data centers. Tier 1 data centers will be protected by fingerprint scanning and SAS 70.

Do you agree with forecasts that SaaS will eventually become the dominant mode of software delivery?

Maddison: There are a few analyst forecasts that up to 10% of existing software apps will be replaced by SaaS. I see no reason to argue with that. I think there are two elements; certain applications will get replaced but I also see there's a lot of opportunity to complement existing web applications. I don't think SaaS is going to replace traditional software delivery totally.

Do you anticipate additional SaaS releases by TrendMicro in the future?

Maddison: We're looking at probably releasing a new service each quarter and an update on existing services each quarter. One thing that's quite striking is that the SaaS model allows companies to get smaller releases out there more quickly so that, instead of waiting for 12-18 months for a software release, we're able to get smaller releases out there much more quickly. The idea of a new feature on a monthly basis is quite a new model for customers.

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Next week should be an announcement-heavy one in the SaaS world, with SAP planning its preview of the much awaited A1S project and Salesforce.com holding its Dreamforce Conference in San Francisco. InfoWorld reported on the product that the CRM giant will introduce, which is currently called Visualforce. Visualforce will introduce to customers the ability to design customized application interfaces to suit their needs.

Stacy Cowley of CMP also reported on Salesforce.com's plans, mentioning also that the company will have "a big megaphone" for its evangelizing at the conference, which opens on Sunday, and that the company has a history of kicking its Dreamforce conference off with big "splashy" announcements.

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Internetnews.com's David Needle reported on an announcement that IBM will team up with StrikeIron to offer what Needle called Data as a Service (DaaS). As a part of the deal, IBM's Mashup Hub will now include seven of StrikeIron's data services that can be dragged and dropped into IBM's QEDWiki, which is a browser-based gtool for creating mashups or other links between Web-based information services. Read more.

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THINKstrategies has announced a new set of packaged services aimed at helping new SaaS companies and managed service providers to ensure that they are ready to deploy their solutions. In a press release, THINKstrategies states that it has developed its Readiness Assessment Services (RAS) in response to increasing demand for these solutions among end users and the discovery that many companies that are trying to capitalize on the trend are not, in fact, fully prepared to succeed in the markets. In its readiness scorecard, THINKstrategies will assess clients in multiple areas such as service delivery platform, pricing, packaging, market segmentation, and more so that the companies can address weaknesses before going to market. Read more.

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Another couple of interesting announcements came this week at BEAWorld. First, EnterConnect Inc. and BEA announced a partnership under which BEA will provide the infrastructure to power SOAAPPS.com, which will be a business on-demand marketplace for mid-market executives seeking enterprise applications through SaaS. In its press release, EnterConnect predicted that the move would "empower independent software vendors to build, market, sell, deploy and manage SaaS offerings" and to better take advantage of growth in the SaaS market. More here.

BEA also announced a new project, code-named Genesis, in which it aimed to bfring together a number of Web 2.0 technologies into a business application platform to facilitate assemby and deployment of dynamic business applications. eWeek's Darryl K. Taft reported on the announcement and a speech by BEA Chairman and CEO Alfred Chuang, in which Chuang stated that the family of products that comprise Genesis will also facilitate BEA's introduction of SaaS functionality.

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It seems Capgemini's decision to support and offer Google Apps has sent ripples through the media and put a spotlight on the enterprise readiness of Google Apps Premier Edition. John Soat of InformationWeek's CIOs Uncensored weblog said that the Capgemini announcement meant that maybe more CIOs should take Google seriously as a business software provider. Soat originally commented on a Burton Group report questioning the enterprise-readiness of Google's SaaS tools and pointed out that most CIOs might find Google's limitations "limiting," but Soat points out that the Capgemini move gives a new level of credibility to Google although questions still remain about functionality and enterprise support.

Reporter Paul McDougall, also of InformationWeek, reported on a Gartner bulltein in which Gartner analyst Ben Pring predicted that the Capgemini/Google deal would further boost the SaaS market in general, writing, "Capgemini would not align itself with Google and risk upsetting its relationship with Microsoft if it did not sense among its customer base of large multinational corporations a genuine interest in Google's application initiatives."

CNET reported further on Microsoft's retort to the announcement, in which it urged users to ask themselves ten specific questions about Google Apps, scorning Google's history of releasing incomplete products as "beta." CNET quotes Ovum analyst David Bradshaw as saying, "Microsoft is paying (Google) the second most sincere form of compliment, in treating them as a serious rival."

ZDNet's SaaS blogger Phil Wainewright was skeptical of the announcement's importance, writing in a blog post yesterday that Google and Capgemini "just doesn't add up". Wainewright asserted that making Google Apps more mainstream by packaging it into the Capgemini model was unlikely to sway any mainstream-inclined enterprise away from Microsoft Office, and that companies inclined to deploy Google Apps would not want it "all smothered in consultant goo."

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Application life cycle management company Serena Software today announced a new SaaS-based Mashup Exchange. The tool, called Mashup Composer, will be made available for free to all users, and customers will pay only when the Business Mashup is put into production. In the press release, Serena said that it is the company's first step in an effort to merge Web 2.0 technologies with enterprise systems and that it hopes to make it easy for business users to create new composite applications without specialized resources.

Serena Software was also discussed last week by Scott Wilson of the CIO Weblog, who posted about the still pervasive fear of SaaS and user-driven content management. Apparently Serena's announcement of the Vail mashup platform (the original codename of what became Mashup Composer) sparked some discussion that suggested many companies are still afraid of taking mashups out of the hands of the IT department.

Wilson cited the discussion at a blog by Chris Murphy of InformationWeek where many users responded to the announcement of Serena's intentions with skepticism about targeting non-IT users with a mashup creation tool, pointing out that, after all, IT departments were there to ensure corporate IT policy was being followed and that implementations were sound.

What do you think? Post any comments below. We're interested to hear your thoughts.

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The news of the day is Capgemini's partnership with Google to boost the enterprise version of Google Apps Premier Edition. The global consulting services company said the move will "extend its portfolio of desktop solutions, enabling it to support more client employees, regardless of their locations, platforms and roles." In explaining the decision, Capgemini cited Gartner's estimates of 25 percent annual growth for SaaS through 2010 and its hopes to capitalize on SaaS growth by adding Google Apps to its desktop solutions portfolio.

Every day seems to bring multiple announcements of new SaaS products and services, and it seems that nearly all applications are to be delivered in SaaS format sooner or later, if they aren't already. Google Apps is still considered lightweight in comparison to Microsoft Office by most, but that could certainly change. Juan Carlos Peres of InfoWorld reported on the news with the headline "Web-based desktop apps get serious," but was quick to point out that Capgemini's CEO did not expect Google Apps to displace Office but rather to fill the niche needs for enabling document collaboration and bringing Office-like capabilities to more workers.

ZDNet's Dan Farber also commented on the move, pointing out that it may not be an easy sell given that companies might be concerned about entrusting data to Google and about the lack of offline capabilities in Google Apps, but that it was a good move for both Capgemini and Google overall.

Mary Jo Foley, also of ZDNet, had an interesting post in which she cited Microsoft's apparently official reply to the Capgemini announcement. The announcement, attributed to a "corporate spokesperson," claimed that competition was good for the industry overall but then listed ten questions that it suggested companies ask themselves before switching to Google Apps. The concerns seem to be valid, but thus far no one is really touting Google Apps as a replacement for MS Office, so one would wonder why the apparent defensiveness, and why Microsoft doesn't just add more collaborative features to MS Office.

Foley also posted a commentary on the announcement, in which she brought up some interesting points about price, demand, and integration. She also pointed out that no one has yet fully explained the claim that Google Apps is "complementary" to Office despite the frequent denial by Google that it sees the application as a competitor to MS Office.

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Dan Farber of ZDNet reported yesterday on a presentation made by Adam Carson of Morgan Stanley at the Office 2.0 Conference in San Francisco. Carson has been "preaching the Web 2.0 gospel" to Morgan Stanley and reported that the company has 70 to 80 Web 2.0 projects in the works, which are gaining traction to Morgan Stanley's largely under-35 workforce. Carson made the interesting case that embracing Enterprise 2.0 technologies will impact recruiting and organization in that the new models of work will appeal more to the younger generation of employees but may be challenging for the older generation of employees to learn and adapt. Farber lists more of Carson's points here.

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In eWeek's Channel Insider, Jeff Kaplan writes that a big question in the SaaS market is about the existence of a viable channel opportunity for solution providers that handle legacy applications. More and more service providers are trying to jump on the SaaS bandwagon, so the channel question is an interesting one. Kaplan offers the example of XO communications, which has recently teamed with Jamcracker to deliver applications to SMBs. Kaplan suggests that SMBs and enterprises alike are increasingly interested in offloading some operations to solution providers in order to focus more on core business. More here.

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KMWorld Magazine has released its 2007 list of trend-setting products, and not surprisingly given the popularity of software-as-a-service, several SaaS applications made the cut. To name a few, DocZone.com and NetDocuments were both called trend setters, as were IntelliEnterprise, Tacilent Corp., and Astoria On-Demand. The list will be featured in the September edition of the magazine. Read more.

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Seems like the market for SaaS-based Web collaboration tools is continuing to attract vendors. Dan Farber at ZDNet posted yesterday about Intuit's plans to pour some new resources into QuickBase, a Web collaboration tool it acquired in November 1999. But the SaaS boom may have the company seeing dollar sign potential in QuickBase, as Farber reports that the company has added 50,000 users since January including 53 Fortune 100 companies.

A couple of weeks back, Eric Lai of ComputerWorld also commented on QuickBase and Intuit's other SaaS plans, including that Intuit plans to release an online version of Quicken to complement its QuickBooks Online Edition, which targets small businesses. Lai quotes Intuit QuickBase general manager Bill Lucchini as saying that Intuit's upper management are "really fired up about SaaS."

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IT Redux's Office 2.0 Conference kicks off today in San Francisco. This year, the producers took the step of offering an iPhone to all attendees in order to drive home the point that the future of the office isn't all about cubicles and paper shuffling. Last year's Office 2.0 conference saw the launching of Google Docs and Spreadsheets, and this year, more than 20 new products will be launched at an event called "Launch Pad" scheduled for tomorrow. Ismael Ghalimi, producer of the event, joined ebizQ recently to discuss Office 2.0 and to offer a preview of the conference. Let's stay tuned and see whether some cool new SaaS applications will be announced tomorrow.

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An interesting disagreement occurred in the SaaS blog world when, over the weekend, blogger Anshu Sharma posted a rant about Software-as-a-Service in which he alleged that SaaS proponents tend to believe there is only one right way of doing SaaS but then tout large annual revenue figures that include multiple variants of SaaS, and then suggested that SaaS purists should consider SaaS to be a small niche market. But self-proclaimed SaaS purist Phil Wainewright of ZDNet disagreed. Wainewright responded that such posts give "false succour" to conventional software industry execs who don't want to accept the need to make radical changes and who want to believe that pursuing SaaS variants keeps their offerings current. More here.

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Tim Ratliff of Hubspan has posted an interesting case study on EDN about "integration-as-a-service," or IaaS. Ratliff calls IaaS a close relative of SaaS, in which companies might access a single hub that connects all trading partners facilitated by widespread acceptance of service-oriented architectures. Ratliff profiles a venture in Europe called Tradeplace, which connects household appliance and consumer electronics manufacturers, and claims that the organizations using the hub are experiencing a combined 22 percent increase in operational efficiencies. Will IaaS be a future trend? Time will tell. Another option, of course, is integration through SaaS, which is offered by some companies such as eVision, whose John Delaney recently joined ebizQ for a First Look podcast.

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OpSource, based in Santa Clara, Calif., is a big name in the SaaS world. Offering infrastructure technologies that power numerous SaaS providers and on-demand companies, OpSource has won numerous awards from various industry bodies and has been ranked highly in a number of industry innovator lists, so we thought it would be interesting to ask a few questions of OpSourceas CEO Treb Ryan.

Q: Please describe OpSource's offerings in a nutshell.

A: OpSource delivers Web applications and SaaS for on-demand companies, with hundreds of applications, millions of users and billions of transactions supported daily.

Q: What sorts of business problems usually lead companies to solutions like
OpSource's offerings?

A: Delivering services via the Web is not in the DNA of software companies.
Instead of diverting resources to build SaaS delivery capabilities internally, OpSource helps our customers meet the challenging customer requirements for on-demand, live, 24x7 access to software as a service. Delivering on-demand software that is highly available and reliable, in a scalable, secure environment, requires an entirely different customer support and operational infrastructure than on-premise licensed enterprise software.

Q: Is security a big problem when it comes to SaaS? What challenges do SaaS vendors face in guaranteeing security of applications?

A: Data security is actually a big benefit of SaaS. Good SaaS applications are always locked down in secure data centers, and are usually SAS 70 audited (all of our customers are because OpSource is SAS 70 Type II audited) and offer SLAs on data protection and security. Most current security issues are related to users that have lost laptops with critical data or tapes that have gone missing. This doesn't happen with SaaS applications as the data never sits on the laptops. See to Phil Wainwright's excellent blog post on the security advantages of SaaS.

Q: Where do you see SaaS going in 10 years? Do you think it will become the dominant mode of software delivery?

A: Absolutely. IDC estimates that the worldwide software-on-demand delivery model will reach $14.5 billion by 2011, representing a compound annual growth rate of 33%. Not everything will be delivered on-demand, but certainly the more innovative applications will be delivered via the Web. We're seeing that already. SaaS has enabled a level of innovation that did not exist before.

Applications that were merely a glimmer in someone's eyes a few years ago are now a reality because of SaaS. The ability to collaborate and leverage Web 2.0 technologies has completely changed the business landscape, whether it's the way businesses operate with consumers (eBay, Google, Amazon), or the way businesses interact with other businesses. For example, Brightidea enables businesses to work together more effectively across the workforce to spur innovation and new ideas; Etology enables buyers and sellers to easily conduct online advertising transactions, while Mediserve enables patients and doctors to collaborate post-op during the rehabilitation period.

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Clint Boulton of eWeek reported on an interview with Burton Group's Guy Creese about Google Apps Premier Edition, suggesting that it "may not be all it's cracked up to be." Google Apps is cheaper than al,ternatives such as Microsoft Office, but Creese suggests that businesses not forget to use "due diligence" in evaluating the software, which originated in Google's consumer product line, and he points out that the individualized setup of admin needs could cause problems in an enterprise setting. Read more.

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Over the past few days, a couple of blog posts have addressed the issue of reliability of Web-based applications. John C. Dvorak of PC Magazine cited the example of Windows Genuine Advantage's weekend outage in which Microsoft's WGA server was out for 19 hours this past weekend, and Dvorak drew the conclusion, "All this proves is that these Web-based applications cannot be trusted." Dvorak also discussed the threat to software-as-a-service in that server outages would cause massive downtime to a large number of users.

Matt Asay, of CNET's Open Road Blog, commented on Dvorak's post saying that customers in the SaaS world are 100% helpless if something goes wrong, because they don't have the code and don't have IT staff who can go in to troubleshoot the outage--meaning companies are completely reliant on the vendor. But then, TalkBack posters cried FUD and pointed out that outage risks could be managed and the real concerns of SaaS were security and IP.

What do you think about SaaS security? Send your thoughts for potential consideration for a future SaaS Week article.

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In a two-part series, CRMBuyer's Erika Morphy reported on best practices for companies considering a SaaS implementation. Starting with a needs assessment and close look at the market is best, obviously, but then in part two of the article she looked beyond implementation to how to keep on top of the marketplace and the different options offered by SaaS.

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The buzz around SAP's A1S product is increasing. Reportedly, the product will use the SaaS model for ERP and CRM applications with SMBs being the target. Reportedly, SAP is set to unveil A1S on September 19, a move that is being closely watched around the Web. Will SAP's gamble pay off? Opinions vary.

Summing up a lot of what seems to be the general consensus that SAP's move is a gamble, Internetnews.com's Larry Barrett a few weeks ago reported on an interview with Gartner analyst Dan Sholler in which Sholler commented, "No one has ever proven they can sell this type of business technology this way. SAP is betting the profitability of the company that it will be able to do it."

And if eWeek's Renee Boucher Ferguson is stating correct figures, betting the profitability may not be a stretch, as she reports that SAP has spent somewhere between $414 and $552 million over eight quarters on developing A1S, and that SAP may be planning A1S as the future replacement suite for its former flagship product R/3.

Time will tell what happens with the release, but some of the target customers may not be terribly interested, according to a Forrester Research report about whichSearchSAP.com's Jon Franke wrote saying that 60% of SMBs in its survey were "not at all interested" in SaaS for ERP and preferred on-premise products.

We shall see if they are more or less interested after September 19.

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Framingham, Mass.-based CoreBlox calls itself "the pioneer in Channel Management Solutions." The company's core offering is products and services that use the software-as-a-service approach to offer a platform for support across the channel. To get an idea of how this works in reality, CoreBlox's CEO Todd Clayton recently answered some questions for SaaSWeek.com.

1) What is CoreBlox and how does it work?

The CoreBlox on-demand solution streamlines the customer support process for organizations to more efficiently service their own and their channel partners' acustomers. CoreBlox includes search, navigation, knowledge management and web-based ticket management modules. The CoreBlox SaaS solution is composed of a flexible and modular application integration framework based on an open source platform, Plone. Seamless integration is provided in the CoreBlox enterprise version for salesforce.com CRM as well as Angel.com IVR for phone support. Other complimentary systems, such as ERP, ESD and ESL, and PRM could also be plugged into the CoreBlox system.

2) In 75 words or less, please outline why a company should be interested in CoreBlox.

CoreBlox offers a way to reduce costs and increase customer satisfaction within your support ecosystem. Support organizations automate case management for both direct and channel customers. They create a global knowledge base, make the latest files, patches and documentation available for download, and delegate user management to the channel. Resellers find their self-branded CoreBlox site eases the service process, including one-click issue escalation. Customers leverage self-service features and overall, experience quicker resolution times.

3) What's the learning curve like for CoreBlox? Do people typically need a lot of training to use it?

CoreBlox doesn't usually require much training. Customers will find the Product Tour on our site helpful while orientating to the CoreBlox user interface and functionality. We provide assistance via e-mail for
Free version users or through our customer support web site and telephone for Enterprise users.

4) What are they key differences between the free version and the paid version of CoreBlox?

The Free version of CoreBlox is targeted at small and medium sized enterprises, as it is free for up to 10 internal (and unlimited external) users. With this plan you also get 100 Mb server storage space and email access to CoreBlox support.

CoreBlox also offers a 30-day trial for larger organizations to try the Enterprise plan for free. The Enterprise plan includes up to 10 internal and unlimited external users at no charge, then costs $50/month/user for additional users with volume discounts available. Included at that user price is server storage space up to 10 GB, SSL support, customizable site URL as well as access to CoreBlox support via email, phone and website. With the enterprise version you can also receive salesforce.com CRM integration at an additional cost.

5) Can you offer a brief example of a real-world use of CoreBlox and the benefits it brought the company?

Let's look at two scenarios; a business providing direct support to customers and a business using channels to sell and service its product.

In the first scenario, a small Atlanta-based medical instruments company (Med Inc.) has 8 employees in its support organization who provides direct support to customers. By using CoreBlox, Med Inc. can quickly automate their case management process. Branding their CoreBlox site with Med Inc.'s logo, images and custom color scheme, means the customer experience is personalized. When a customer calls with a problem, a convenient one-click process allows for the creation of new support cases and the ability to assign the case to the author or someone else. The support team can then also manage support cases from a single queue, filter support cases to determine how many cases are in each stage of the resolution process and link solutions to ensure consistent case resolution is delivered to the customer. Delegated user management enables customers to manage their own login and access rights. A global knowledgebase promotes customer self service and ensures consistent quality of information across the support organization.

Secondly, let's use the example of a NY-based computer manufacturer (Computers Inc.) with 10 channel partners. Computers Inc. sells its products solely through its channel, and partners are tasked with providing front-line support for any issues or requests that come in from the end customers. In this scenario, both the reseller and Computers Inc experience all the benefits described in scenario one above. In the event a reseller is unable to resolve a customer's issue, they are instructed to escalate the issue to the attention of Computers Inc. for follow-up.

Offloading front-line support to resellers can be a great benefit to Computers Inc. This way the Computers Inc. support team can steer clear of the most common support issues and focus on complex problems that require their expertise. However, in a non-CoreBlox enabled environment this can be a tricky scenario to manage for several reasons:

1. Typically each reseller has its own support system for managing interactions with customers. In our experience this is some combination of paper, e-mails, and spreadsheets. Not only are these methods scattered and inefficient, there is also no integration with Computer Inc's support system. This translates into a lack of visibility into what kind of problems these resellers are handling, and a bottleneck in the escalation process should one be necessary.
2. The lack of integration makes it difficult to disseminate the critical product knowledge that both educates resellers and enables customers to perform self-help.
3. The overhead of being asked to provide support without the proper tools and information slows the resellers down and takes the focus off their most important purpose: selling.

CoreBlox helps Computers Inc. to create a powerful and efficient partner support channel. With our solution, Computers Inc. can:

1. Give each of its 10 resellers their own unique, branded support site
2. Seamlessly populate each reseller's site with useful knowledge about their products and services (the knowledge is fully searchable and easy to navigate)
3. Gain visibility into all the support interactions between resellers and customers, regardless of whether they become escalated
4. Receive support escalations that automatically contain the entire history of interactions between the reseller and the customer
5. Reap the financial rewards of providing resellers with all the tools they need to provide excellent customer support, shifting the focus back to selling

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In Computer Dealer News, reporter Paolo Del Nibletto comments on Microsoft's newly announced hybrid SaaS business model, which it calls "Software+Services." The initiative is a channel partner program based on three delivery models: on-premise, hosted by partners, or hosted by Microsoft. The company calls the initiative ambitious and in response to Google, which offers a number of all online services, but CDN reports also that Microsoft's partners have told the company that they are not terribly interested in the Software+Services approach. Read more.

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IBM yesterday announced its plans to purchase SaaS Web conferencing vendor WebDialogs. According to Clint Boulton of eWeek Channel Insider, the move is evidence of how large high-tech enterprises and startups are both vying for a chunk of the online collaboration software market, which Boulton suggests could be worth billions. IBM plans to bundle WebDialogs' technology with its Lotus Sametime assets in an offering called Lotus Sametime Unite, which could mean IBM will try to boost its standing in unified communications against Microsoft and Cisco Systems. Boulton delves further into the promise of the Web collaboration market and how startups are also vying for their share of the business. Read more.

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In a press release yesterday, information security company ComSec Inc. announced it had released a free "heatmap" that allows companies to graphically evaluate security of numerous SaaS vendors. Obviously security is a key concern for any organization considering a software-as-a-service solution, so data about security could be valuable information. The catch, of course, for accessing the heatmap is that you must offer up your details to be added to ComSec's marketing database before you can download it -- but interested readers can request it on ComSec's website.

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On Monday Business Objects and Thomson Financial announced they would partner to offer customers packaged information about markets that is ready for analysis upon delivery. Thomson Finacial president Matthew Burkley had this to say in the press release:

The relationship we are building with Business Objects will give us the unique ability to deliver our best-in-class financial data in a powerful, secure, easy-to-use model. Now, companies will be able to easily and flexibly link their decisions to outside market factors, giving them a real advantage.

InfoWorld reported on the announcement with comments from Liz Herbert, a senior analyst with Forrester, who called the announcement a sign of convergence of SaaS with industry-specific applications.

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The big news in the SaaS space today was Walnut Creek, Calif.-based Workday Inc.'s release of the beta of Workday Financials. The company calls this the first on-demand alternative to ERP and an entirely new model for helping companies to perform ERP functions while also measuring business performance. The particularly interesting aspect of Workday is it's promise to do this all on-demand with the SaaS model, requiring no hardware, installation, upgrades, et cetera. In the press release, Workday president Aneel Bhusri had this to say:

Workday is bringing together the lower cost of ownership of Software as a Service with our deep domain expertise in enterprise business solutions to deliver an on-demand alternative to ERP. While ERP requires complicated integrations and bolt-on additions to deal with changing business requirements, Workday is built from the ground up to support todayas agile enterprise, and our modern architecture means we can continue to adapt and extend our solutions to meet customer needs for years to come.

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Oliver Rist of InfoWorld points out in a new article that for SMBs, Software as a Service and other hosted software setups have enormous benefits for SMBs in cost reduction. SaaS eliminates many key maintenance costs that could potentially be crippling. SMBs are trusting the Internet more as reported outages decrease and broadband Internet access becomes more and more affordable. In addition to reducing the need for expensive hardware and constant upgrades, SMBs often can hire fewer IT staff. Read more.

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ZDNet Asia reported on a speech by Microsoft Thailand's Fukiat Julnual about how Microsoft views SaaS. Fukiat pointed out that Microsoft's policy is not to compete with its partners and that the company does not intend to become a Google or Salesforce.com, but that it is developing an advertising network to work with the traditional revenue stream such as an email service that caters for SaaS with a vendor or hosts with a third-party or traditionally on-premise. End users buy Exchange and then host it or resell it as a service but Microsoft is not a pure-play SaaS vendor itself. Read more.

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