On-Demand Apps To Grab Share Of Software Market

Software isn't dead, at least not yet, despite what Salesforce.com CEO Marc Benioff says. But a Gartner report predicts that software as a service, which accounted for only 5% of all business software spending last year, will grab 25% by 2011.

On-demand CRM applications represent a big piece of that projected growth: Software as a service accounted for about 8% of all CRM sales last year, and that's expected to reach 12% this year, fueled largely by the rapid growth of Salesforce, Gartner says.

Next week, Salesforce will debut the Winter '07 release of its on-demand CRM apps at its Dreamforce user conference. The release will let companies customize Salesforce apps and use components to assemble analytic reports and dashboards. A limited ability to tailor on-demand apps is often seen as the Achilles' heel of software as a service.

Latecomer SAP, which unveiled its first on-demand app in February, isn't ready to concede the market. Last week, it began shipping SAP Service, the third and final component of its SAP CRM on-demand suite, joining the sales and marketing apps that are already shipping.

While some see on-demand applications appealing more to smaller companies, Gartner says there's no reason businesses of all sizes can't use them, if only for departmental initiatives that augment on-premises software.