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These days, even Bill Gates is bandying around the term 'software as a service'. But what does it mean?

The point of offering software as a service (SaaS) is that it allows companies to avoid deploying and managing those applications within their corporate networks. This means that they do not have to purchase and manage any hardware or software for disseminating use of those applications to end users. Instead, they purchase the right to use a particular application via web-based services as they need it – or, on demand.

According to those offering SaaS, this provides better value for customers than the traditional model of paying for software licences, installing the software and managing the application and associated upgrades themselves.

One of the main proponents behind the SaaS movement is Salesforce.com. Salesforce was founded some five years ago with the intention of developing a platform on which applications could be built, with a web-based interface so that companies can purchase the rights to use those applications as they need them. The first application that it built was CRM – and it now claims to have a market share of around 50 per cent of the on-demand market for CRM applications.

Since it delivered its first application, Salesforce.com has been hard at work developing further services for customers. These include a platform for easing integration with back-end technology used in companies and a toolkit for expanding and customising software. At the same time it has built out an ecosystem of partners to help companies with implementation and further development of applications.

Most recently, Salesforce.com has added a service that takes it closer to executing on the vision it has always espoused – its AppExchange offering. This is a web-based portal giving companies access to a range of applications for on-demand use, ranging from financial and administrative applications, to applications focused on specific industries.

According to Salesforce.com, the reasoning behind this is that the internet provides a more dynamic environment for accessing services than traditional means of distributing software.

Chris Boorman, VP of marketing in EMEA, explains the concept with reference to the online retailer Amazon.com. He highlights that when Amazon was founded, it primarily offered books for sale; but it fundamentally changed the way that people browse for books. In a high-street bookstore, people will spend time looking at a range of books, but the books that they are able to look through depends on the amount of time that they have available and their willingness to spend time going through all the different departments.

At its online store, Amazon provides customers with the ability to search for books by title, author, or keyword and to compare books related to a particular topic in which they are interested. And Amazon's service can also recommend products to customers based on their buying history, search preferences or personal profile that they build.

It is this same sort of idea that Salesforce.com has built with its AppExchange offering. Compared to a traditional high-street computing store, customers can more easily see a wide range of competing products and can read reviews from other users, as well as checking how other users rate the product in terms of a score out of five. This is a bonus for companies that do not wish IT budgets and resources to be tied up installing and managing software – especially those applications that are only used by a few people in the company.

Only launched this month, time will tell as to how great the take up will be. But Salesforce.com is betting that this will be a hit with customers and, never one to hide its lights under a bushel, is adopting the slogan "success on demand".

Copyright © 2005, IT-Analysis.com

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