Larry Ellison told financial analysts in a quarterly earnings call yesterday that Oracle hasn't participated in the software-as-a-service trend because there's no money to be made there. If Ellison's observation isn't a red flag to CIOs, than I don't know what is.

What Ellison is saying, essentially, is that SaaS stinks because customers would pay so much less to Oracle. There's less consulting fees, integration fees, and no big up-front license fees. Ellison called subscription-based software "very interesting, but so far no one has figured out how to make any money at it." Oracle's plan is to keep selling to big companies, pitching them on vertical applications once they've filled up on databases, middleware, and general ERP. It offers Siebel CRM On Demand, and has said it's willing to host software for customers, but Oracle, by far, is primarily an on-premise software company.

SAP is entering SaaS with its Business ByDesign offering due out next year, but only because it sees a way to get small companies of 100 to 500 employees that aren’t yet on its customer roster. You better believe SAP has no plans to sell subscription-based software to midsize-to-large companies.

SaaS isn't a panacea. There are instances where it wouldn't work. Applications supporting a high number of transactions aren't ideal, for example, because SaaS vendors typically limit the number of pings on a database. In some cases, subscription software wouldn't offer the needed customization. But there are many big companies starting to buy SaaS for one or two applications, and sometimes more, because they know a good deal when they see it.

If a traditional software vendor tries to convince you that SaaS is no good for your specific need, don't take it as gospel. Do the research and find out if what you want really does need to be on premise. After all, it's your money.