KEY POINTS:
Lower operating costs, greater flexibility and reduced implementation risk are the main factors driving the uptake of software delivered via the internet, according to vendors operating in the sector.
The country's first Software as a Service Summit, was held in Auckland on Monday and featured key local and international players who are using internet rather than desktop-based software packages to deliver applications to the workforces of major corporations.
"These companies are using exactly the same services you'd use as a two-person company," said Salesforce.com sales engineer, Steve Buikhuizen.
Salesforce.com, was formed in 1999 by former Oracle executive, Marc Benioff, who wanted to build a system that would supply customer relationship management and sales force automation software at a lower cost than existing software packages, using the internet to link users.
After listing on the New York Stock Exchange in 2004, Salesforce.com's growth started to take off and the company now has about 30,000 customers worldwide and 646,000 subscribers, 10 per cent of whom were added in the last quarter alone.
"Now we've lots of large customers, marquee names," Buikhuizen said.
"You're seeing this [SaaS] invasion not just into CRM but all areas of business."
Those marquee names include computer maker Dell which runs Salesforce.com across 15,000 computers and financial giant Merrill Lynch, which has a 25,000 seat implementation of the software.
Salesforce.com has around 100 customers locally including Fairfax, IAG, Air New Zealand, Vodafone and Provenco.
In the SaaS world, a company's data is typically hosted by the application provider in a central location and updated in real time through the web browsers of those accessing it.
Buikhuizen said Salesforce.com had spent $75 million on data centres in the United States to house its customers data.
"If the San Andreas fault line goes, you may have bigger things to worry about, but your data will be safe," he said.
The company's growth has in part been fuelled by its AppExchange initiative, which allows external software developers to build add-on applications that tap the Salesforce.com system.
Buikhuizen said: "Forty-five per cent of all our web traffic goes through our web API, not through a browser."
Reducing risk in implementing IT projects was also behind New Zealand Post's move into SaaS, according to general manager of sales and service, John Marshall.
It moved to a customer relationship management package from US company Right Now.
"You don't have to do the big bang, it's modular," said Marshall.
While large corporates are switching to a SaaS service to run their crucial systems, accounting software firm Xero is applying the same model in the small business sector.
Xero's chief operating officer Alastair Grigg, said the company had learned from popular web services aimed at consumers.
"This is a consumer-oriented application rather than one that's come down from an enterprise.
"We knew that it would be sold over the back fence, around the dinner table."
Sold for a monthly subscription instead of an upfront payment, Xero offers general ledger and accounting features via a web browser.
Grigg said 65 of the 100 customers that trialled the software have signed up to continue using it.
The internet-based delivery model lets Xero update its software every fortnight.
The ability to give several people access to a Xero account and collaborate elevated it above "low-value compliance shoe-box accounting" packages.
Xero is in the process of completing a share market listing on the NZX.
Why an IPO?
Grigg said: "We've a big education task ahead of us.
"It's easier to do that with the profile of [a listed company]. We think it creates a big competitive barrier for other entrants. We believe [the market] will only back one horse."
