Software-As-A-Service Isn't A Big Seller For The Biggest Software Vendors

Established vendors are stampeding toward the software-as-a-service model. So far, there's not much payoff for their effort.

Microsoft is developing a version of its sales management software that can be accessed with only a Web browser. Hosted versions of Oracle's business apps have been sleepy sellers, generating about $85 million in revenue in the most recent quarter, according to Credit Suisse.

SAP launched a hosted version of its mySAP CRM software this winter and just added a marketing module. But SAP doesn't sound like its heart is in it. Customers want on-demand software so they can get started quickly, says Peter Graf, SAP's executive VP of product marketing, but they want to move the software in-house as they expand. Regarding how much revenue mySAP CRM brings in, Graf says, "Honestly, I don't know."

Such uncertainty isn't scaring others away. Avaya this month started a $25-a-month, per-user hosted voice-over-IP service. Watchfire in April launched hosted vulnerability assessment software. AT&T subsidiary Sterling Commerce last week bought Nistevo, an online logistics management company. SAS Institute this month started offering business intelligence, anti-money-laundering, and supply chain and marketing analysis apps as services. Web analytics, which SAS has offered for years, bring in about $20 million a year.

For the most part, as the big vendors move to services, they're careful not to endanger their cash-cow software licenses.

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