SaaS is one of those buzzwords that have changed over the years. First, we called them application service providers (ASP), then just service providers, and now software as a service (SaaS). I think there is an unwritten rule that you have to switch buzzwords at least every tow years, else lose your market.

However, as I'm thinking about what these guys are becoming, I think their purpose is changing, thus the name should change. Hear me out.

In the first generation SaaS technology, the SaaS guys where standing up very sophisticated applications, typically driven through the user interfaces. In essence they replicated enterprise applications on the Web, first in a poor way, now they are actually better than their enterprise-based counterparts. Salesforce.com is the best example of that.

In the next generation SaaS technology, we are seeing a slow but steady shift to the use of services, along with the visual user interface. Over time this shift will become much more obvious. Thus, the notion of SaaS is more about providing services with both behavior and information for use within the enterprise, or perhaps with other Web-based applications (dare I say mashups). Indeed, we are not outsourcing entire applications, but outsourcing services or processes, and have the power to mix and match processes to meet the exact requirements of the enterprise.

The notion is very exciting, and something I've covered many times here before. At the end of this hype cycle, if there is an end, we'll have enterprises where some, many, or most of their processes will be served up from outside process outsourcing vendors, who today we are calling SaaS players. This will be the largest growth area on the Web in 2007 and 2008, keep an eye on this one.

Posted by Dave Linthicum on May 16, 2006 06:51 AM