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More Vendors Latch On To SaaS Model

Lawson, Cognos, and Sterling Commerce are just three of many companies announcing software-as-a-service offerings. Still, SaaS has only so much sizzle with customers.

Why buy when you can rent? That's the mantra of technology vendors these days. More of them are viewing software as a service as a gold rush opportunity and are hurrying to market all sorts of things that smack of SaaS.

Every other day, it seems, there's a software company announcing part or all of its offerings in a software-as-a-service model. This week's entrants include Lawson Software, which is now offering Human Capital Management On-Demand, delivered as a monthly subscription with service-level guarantees, such as a promise to respond to problems with the software within 30 minutes. HR organizations' IT needs are often neglected, explains Lawson VP Larry Dunivan, and SaaS gives them a quick way to adopt software for automating HR without a lot of up-front deployment costs. With SaaS, "the HR director knows he's not going to have to fight for IT resources," Dunivan says.

The business intelligence software market is sweet on SaaS, too, with more vendors rolling out or planning subscriptions. Last week, Cognos announced Cognos Now, described as the first product in a new line of BI software to be offered as hardware appliances and through a SaaS model. One key market for Cognos Now will be customers of SaaS kingpin Salesforce.com, who can analyze their sales data on the devices. Another big BI vendor and Cognos competitor, Business Objects, says it's working to make all of its products available in a SaaS model.

The SaaS model also creates a new way for telecom companies and other nonsoftware companies to get into the business. Telco company XO Communications and Jamcracker, an "on-demand services" company, said Wednesday they're partnering to offer on-demand software for small and midsize businesses. That includes BlackBerry services, McAfee security, Microsoft Exchange and SharePoint, and Arsenal Digital's desktop data backup services. XO Communications, which serves 75 metropolitan markets in the United States, will offer the services directly and through its partners via monthly subscription fees starting later this summer.

Business software company Sterling Commerce, meanwhile, sees an opportunity to make money by helping others selling software and other products via subscription better manage the process. Sterling, which acquired Comergent Technologies for $155 million last November, has folded technology from that acquisition into a new product it's introducing Monday called Sterling Service Contract, designed to give telecom, software, hardware, media, and manufacturing companies a simpler way to manage and automate subscription sales. Traditional order management software, according to Sterling, doesn't do a good job of managing indirect selling, maintenance contracts, service plans, and other attributes of subscriptions.

Tech vendors love to jump on a new trend, and this one even comes with an acronym that sounds like a real word when pronounced phonetically. For the most part, their ambitions are founded in reality: Two out of three businesses are either buying or considering buying software via a subscription model, according to an InformationWeek Research survey in April of technology and business professionals, with customer service, salesforce automation, and human resources cited as the top three uses of SaaS.

Still, SaaS has only has so much sizzle. One in third of InformationWeek Research respondents said no way to SaaS. Security, reliability, and uptime are among the leading concerns.

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