Prediction for 2007: The market for Software as a Service is going to peak soon, and then fall off. In a year, existing players will stabilize and consolodate and one or two players will be profitable, while the rest fall away.
The promise of Software as a Service (SaaS) is the same as that of the web: no more installation and management of client-pc software. You could deliver the software as a service, pay for it when you use it, and cancel your subscription at any time.
So SaaS vendors (a.k.a. Application Service Providers) provided a series of hosted solutions. The commercial public was expected to sign up, relinquish the desktop app, and agree to be billed for using word processing, e-mail, financials, customer service, and other systems.
Many folks have. Goodness only knows that SalesForce.com is a major player in CRM software, so much so that Microsoft has gone directly into competition with Dynamics Live.
The problem is that you get the user interface along with the package, whether you like it or not. Along with that, you may, or may not, get a proprietary interface for integration with your corporate systems. That limits the ability of the organization to truly integrate the 'service' tool with their infrastructure.
Why does this matter? Because the advantages of SaaS are that it is easy to implement and that you can quit at any time, which puts pressure on the provider to do a good job and constantly innovate. However, if you cannot quit at any time, because your integration layer doesn't work with the competitor's service offering, then your service provider has no incentive to improve.
In addition, any solution, these days, that doesn't come with 'out-of-the-box' integration between major business functions, like financials to CRM integration, is dead on arrival. However, you cannot expect all financial system vendors to work to integrate with all CRM service-providers. That would be complex and expensive. This is no better than expecting the end-customers to figure it out.
What is needed is a standard, demanded by the consumers of the service, that all service providers in a field MUST sign up for. To do that, we need a consistent architecture, across ALL SaaS vendors, so that they can write to a defensible interface and so that a SaaS vendor can integrate directly with another SaaS vendor, allowing a company to outsource both CRM and Financials yet have them work together.
That means Architecture at the Internet level. Architecture that vendors sign up for. OASIS is a great place to put it, but the TC for this need doesn't exist there, at least not yet. Doesn't have to be OASIS. Could be any other group willing to drive the standard architecture that allows Software as a Service to integrate across the corporate landscape.
Either we do this as a community or one vendor will do it and force it on the rest of us. Personally, I like community.