Future of Enterprise Software in a SaaS World

I had a call the other day with an analyst in Europe. The topic of the call was the same as many others; how is SaaS moving into the market, what are the opportunities and how will enterprise software cope with SaaS? Good questions, but most financial analysts who have large stakes in huge enterprise software companies don't like my answers.

Last week I did a keynote at the Enterprise Architecture Conference in New Orleans. I spoke on SaaS, SOA and Web 2.0, and always have a bit of a poll as part of my talk. How many people are using SaaS now? About half of the hands went up. How many of those people were using SaaS two years ago? Almost no hands up. How many people will deploy SaaS in the next two years? Almost all hands went up. Hmmmm.The trend is pretty clear. Finally, I asked, how many people are looking to displace one or more of their enterprise applications with SaaS in the next two years? Almost all of the hands went up again. This was a group of about 200 enterprise architects, most working for Global 2000 companies.

Truth-be-told, one of the largest issues with implementing SaaS is not the technology, security or the interface; it's acceptance. Having lived in the world of SaaS for a while now, I've heard many times from those in charge of enterprise IT that they will never use software they don't own and host. However, as things do seem to change in the world of computing, the crowd went the way of SaaS and those who were initially resistant followed along. This is very much like the acceptance of the Web in the early '90s. Enterprises pushed back on it as unsecured, unneeded and disruptive, but the needs of the users won out over the paranoia of IT.

Back to the core question. With the acceptance of SaaS, and the rise of major players such as Salesforce.com and Netsuite, we've seen a softening of the traditional enterprise software market. While the existing ERP and CRM players have begun to retool somewhat for SaaS, the fact is, their culture, business model and technology won't work well as a SaaS play. Moreover, they will appear late to the party.

Thus, while I'm sure there will always be enterprise applications that are owned, hosted and maintained by enterprises, the rise of SaaS is going to diminish the value of traditional enterprise software players, and, at the very least, continue to commoditize the space. I'm not sure there is anything the traditional application providers can do about it at this point. As always, it's a matter of understanding the market today, but more importantly, where the market is heading. That thing they see off in the distance, moving away quickly, is opportunity.

Application integration and service oriented architecture expert David Linthicum heads the product development, implementation and strategy consulting firm The Linthicum Group. Write him at [email protected].Last week I did a keynote at the Enterprise Architecture Conference (EAC) in New Orleans. I spoke on SaaS, SOA, and Web 2.0, and as always, I took a poll. How many people are using SaaS now? About half of the hands went up. How many of those people were using SaaS two years ago? Almost no hands up. How many people will deploy SaaS in the next two years? Almost all hands went up...