On-demand ERP and CRM apps provider NetSuite on Monday filed plans for an initial public offering, a move that could be a milestone for the hosted software industry, according to industry observers.

Bruce Francis, vice president of corporate strategy at Salesforce.com, played down the potential challenge that NetSuite might pose to his firm by raising significant sums. However, he did note that the move indicates that "the software-as-a-service model is clearly catching on, and the emergence of a specialized, niche tier of players [like NetSuite] is another indication that it's prime time for on-demand."

Denis Pombriant of consultancy Beagle Research Group, added that the move "is an important milestone for the industry.

He predicted after the offering that NetSuite, whose investors include Oracle CEO Larry Ellison, will move to take on SAP in the small and mid-size business market, where the German company's applications can be very expensive and difficult to install. He noted that SAP is looking to boost its position with its new in the small and mid-size business market has also been trying to sell into the mid-market with the new on-demand suite of applications unveiled earlier this year.

In the near term, he predicted that NetSuite will continue to compete mostly with mid-market apps provider Sage Software, which offers a fully integrated ERP and CRM software package. Sage sells both packaged software and hosted services.

A spokeswoman for nine-year-old NetSuite, declined to disclose the number of shares to be sold, or the expected price of the stock, citing legal reasons connected with the stock offering.