The On-Demand Influx

As customer interest in on-demand software continues to grow, so does the interest of industry bellwethers. Most notably, Google and Microsoft late last year chimed in with announcements of their own on-demand applications. Google made a moderate splash in November when it announced its Web-analytics tool was available for free. Its hosted service, formerly known as Urchin, replaces and updates the tracking tool previously available with Google AdWords, now called Google Analytics. It provides users with insight into keyword popularity, email campaign success, and page clicks, delivering data in dashboards optimized for executives, marketers, and Web masters. The company hopes to enable marketers and publishers to better understand what Web customers want, helping drive more accurate advertising and better Web-site design. What has analysts excited is the significance of Google's entrance into the on-demand, or SaaS, market. "Google is like the sleeping giant for software-as-a-service. The Web analytics is a great choice, because it fits so well into their adware paid service," says Laurie McCabe, vice president of SMB insight and business solutions at AMI-Partners. "Given the substantial resources that Google has and the expertise [developed with] Urchin, I think that we're just beginning to see what Google Analytics can do," she says. "They could integrate all these tools into an entire business process solution." In addition, the company could follow Salesforce.com's network strategy and copy AppExchange, or buy a company like Salesforce.com or NetSuite, to acquire "an established application and a thriving business software development network," McCabe says. Not to be outdone, Microsoft entered the on-demand space in December with Microsoft Dynamics CRM 3.0, which is offered with both an on-demand and on-premise solution. This follows CEO Bill Gates's directive to all three business divisions to begin investing in on-demand services, citing the advantages enjoyed by companies like Google and Salesforce.com. For Microsoft, using its desktop office as a launching pad can pay off if it integrates the right components and defines clear rules of engagement for its partner system, one of its biggest strengths, according to McCabe. Brad Wilson, general manager of Microsoft CRM, says the key differentiator between Microsoft and other companies will be its ability to let customers switch from on-demand to on-premise without any fuss. "Not everyone wants to rent forever from somebody who might go out of business [or] change their pricing structure," Wilson says. "I think the ability to choose is what this market really wants, and a vendor that is going to deliver that most effectively. Choice beats a lack of choice every time." Microsoft's entry into the on-demand space is noteworthy, but the company still has to refine functions before its applications are on par with the companies already operating in this arena, says Zach Nelson, president and CEO of NetSuite. "Microsoft's applications are still a Stone Age, manage-it-yourself-type architecture," Nelson says. "They still have a long way to go before they can sell anything in a modern on-demand fashion. Microsoft's entry is good for the market and companies like NetSuite, because it drives customers to look for solutions that are delivered as a service." Microsoft will continue to provide ad-hoc tools that answer specific needs, but it would need to gain a better understanding of structured processes before developing a true, hosted CRM application, according to Wilson. Although Google and Microsoft are approaching the on-demand model from different angles, McCabe says, the entrance of such well-known companies "gives the market a big boost and more credibility."