Software as a service: the next big thing

The great SaaS mashup

IBM would also seem to be in a unique position to provide integration between its SaaS partners and enterprises, if for no other reason than the company's vast penetration in enterprise middleware, particularly its hooks into mainframe systems. After all, for SaaS to become a serious enterprise play, that depth of integration will be necessary.

According Rick McGee of IBM Global Services, however, that's not IBM's focus. Instead, he says, the company is focused on helping traditional ISVs make the transition to SaaS and assisting startup partners with technology, marketing, and demand prediction. Ultimately, McGee says, these partner alliances will have strategic value to IBM Global Services BPO (business process outsourcing) business.

"As they become more IT-intensive, you'll begin to see software as a service and the BPO market ... look more and more alike," McGee says. "It's fair to foresee over time, as IBM is providing business outcomes for clients, there's no reason why we would not incorporate into our value proposition software as a service offerings that allow us to extend our capabilities on behalf of a client."

Rearden's Grady, whose on-demand Employee Business Services (EBS) application handles expense management, sees SaaS's true role as a platform for BPO -- to the point where providers will play host to a range of business functions. "The next step is for organizations to leverage expert third parties to handle not just the applications, but the processes that the applications manage as well."

Yet despite the big customer wins for Rearden, Salesforce, Employease, and others, SaaS so far is primarily an SMB phenomenon. And that's fine with IBM, Clark says. "The fastest growing segments are the midmarket and we need to be there with bells on. We need to be there with a play that has a way to roll up or aggregate a lot of the value from these smaller applications into something that we can then in turn offer to our clients and customers, especially in the SMB space."

The ultimate disruptive effect of the "services wave" may well resemble that of the dotcom era, when companies that were smart about leveraging the Web exploited unforeseen growth opportunities. As the viral growth of Web 2.0 mash-ups and walled gardens like AppExchange make clear, every true SaaS application is potentially part of an XML-driven ecosystem. The SMBs that figure out how to tap into the power of those ecosystems could become the enterprises of tomorrow.

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