The Top Five Vendors Using SaaS

To understand a certain market sector, industry observers often create lists of its top vendors. When it comes to Software as a Service, however, pinning down the market is like pinning down a Sumo wrestler—nearly impossible.

Because SaaS is a delivery mechanism – as opposed to a product itself – it spans a number of markets. And SaaS is taking off: the Yankee Group forecasts that 50 percent of software purchased by small- to mid-sized companies in 2008 will be SaaS. A recent Gartner study predicts that SaaS will enjoy a compound annual growth rate of 22.1 percent through 2011 for the aggregate enterprise software markets – more than double the rate for total enterprise software.

With this rapidly changing landscape in mind, here are five vendors deploying SaaS who have attracted the attention of analysts all over North America.

Name: Salesforce.com

Location: San Francisco

Why it’s in the top five: When most people think of SaaS, they think of Salesforce.com, the Customer Relationship Management (CRM) juggernaut founded in 1999 by former Oracle executive Marc Benioff. Nearly all research firms cite CRM as one of the largest current applications of SaaS (usually behind content, communications and collaboration).

Salesforce.com isn’t the only company in the CRM space, but it certainly is one of the biggest, anticipating an estimated $750 million in revenue in FY2007. The company also estimates it could top $1 billion in revenue this year. Analysts at AMR Research agree, and recently pegged Salesforce.com as a force to be reckoned with.

What to watch for: After conquering the challenge of delivering individual services via SaaS, Salesforce.com entered 2008 with an entirely new approach: platform-as-a-service. This offering, dubbed Force.com, incorporates a smorgasbord of Web services into one, enabling developers to create and deliver any kind of business application, entirely on-demand and without software.

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“They are heading in the right direction,” said David Bradshaw, an analyst with Ovum. “The point of being a platform is not just the platform itself; it’s a healthy ecosystem playing in [the company’s] direction.” Still, many suggest Salesforce.com better watch its back—as the company gets bigger and more successful, takeover attempts from Microsoft, IBM, Oracle and SAP could become more of a threat.

Name: NetSuite

Location: San Mateo, Calif.

Why it’s in the top five: Like Salesforce.com, NetSuite also has enjoyed double-digit revenue growth in the CRM market and continues to gain momentum. The company was founded by Oracle founder Larry Ellison and protégé Evan Goldberg in 1998, and after a successful IPO in 2007, the company scored $108.5 million in revenue for FY2007.

Sanjeev Aggarwal, senior small- and medium-sized business strategies analyst at The Yankee Group, recently tabbed NetSuite as a company to watch in the CRM, ERP and accounting spaces. In particular, Aggarwal hailed the company’s new SuiteFlex offering, which enables customers and third-party vendors to customize and add on to the company’s existing SaaS technologies.

What to watch for: In January, NetSuite announced SuiteBundler, a new part of the SuiteFlex offering designed to let third-parties further customize NetSuite's business applications. While many analysts hailed this release as another step in the right direction, others were concerned that the development puts NetSuite into more direct competition with SAP, a much more powerful player in the marketplace.

Others worry that because many companies that implement NetSuite tools must hire consultants to set things up, the software looks and feels like a traditional off-the-shelf enterprise offering. “They’ve started to fall off the buzz chart,” says Sinclair Schuller, CEO of Apprenda, a SaaS-enablement vendor. “In the SaaS business, buzz is everything.”