Web-hosted enterprise search has failed to catch on because of its limited scope and the rise of search appliances from vendors such as Google, analyst firm CMS Watch says in a new report.

The Google Search Appliance and similar products that are relatively simple to use have reduced demand for software-as-a-service, the analyst firm says.

"Software-as-a-service delivery models are hot all across the software landscape, but search has become an exception," CMS Watch says in a press release. "Early hosted players Blossom and Pico have remained relatively obscure. The grand-daddy of hosted search, Atomz, has been acquired twice and now belongs to Web analytics vendor Omniture."

Google has dampened the enthusiasm of potential competitors with its hosted offering as well as the Google Search Appliance and Google Mini, an appliance for small and midsize businesses, CMS Watch says.

The Google Search Appliance is a bundle of hardware and software that allows businesses to use Google's core search technology to query their own data sources, such as file shares, intranets, databases, applications, hosted services and content management systems.

Google's product and others, such as the Thunderstone Search Appliance, has cut into demand for the type of simple, Web-oriented enterprise search that's typically offered by software-as-a-service vendors.

Web-hosted enterprise search also suffers from technological limitations, CMS Watch says.

"SaaS offerings have been limited largely to Web site search scenarios -- an important use case, but not as high-value as multi-repository enterprise search, which depends heavily on the kind of internal WAN access and onsite software connectors that SaaS vendors simply cannot provide today," the analyst firm states.

The enterprise search market is crowded with big names, such as IBM, Microsoft, Oracle, Fast Search & Transfer (FAST), and Autonomy. Microsoft, for example, is pumping out new products, having unveiled a free search server as well as a licensed version this week.

Specialty search vendors such as Recommind and Vivisimo have also made their mark.

Enterprises can still consider software-as-a-service a viable option, despite its limitations. "Just sign on with your eyes open and make sure you understand the provider's future plans and focus," CMS Watch's Adriaan Bloem says in a press release.

CMS Watch's analysis of major search offerings found an increasing number of Web 2.0 features such as social ranking systems that guide search results. "Customers seem to find these more attractive in demos than in real installations," CMS Watch said.

In another trend, categorized search results are becoming "nearly ubiquitous" throughout the marketplace, after being popularized by Vivisimo and Endeca.

One area where enterprise search in general falls short is testing and configuration management, CMS Watch says. Enterprise customers are demanding better tools in this area from search vendors.

CMS Watch evaluates content technologies and maintains a neutral stance by refusing to accept funding from vendors.