With the economy continuing to struggle, organizations are increasingly turning to Software-As-A Service (SaaS) offerings as means to control costs. SaaS solutions are far less expensive and quicker to implement than installed solutions. There are no hardware upgrades necessary and with pricing calculated on a per-seat basis the upfront costs and risks associated with traditional software and system purchases is eliminated.

An October 20 report by Gartner says that SaaS sales are expected to surpass $6.4 billion in 2008 - a 27 percent increase over 2007 revenue of $5.1 billion. By 2012 SaaS revenue is expected exceed $14.8 billion.

With this in mind, here are 10 key trends that SaaS companies should think about as they work toward driving growth and adoption of on-demand applications in the marketplace:

1. Itʼs the product, stupid!: Due to the emphasis of "Try It Buy It" approaches for marketing SaaS applications, product management and product marketing teams are forced to push more of the "whole product" and "solution selling" concept back into the product itself. Instead, developers should focus on incorporating business process into product features.

2. Software without borders: Applications are becoming less and less restricted to a particular organization and more oriented around user networks. This has the effect of making the applications more user-centric rather than organization-centric. Paradoxically, this is good for the organization since it will lead to better adoption.

3. First impressions, first: SaaS applications have a few minutes to make an impression. I like to focus on the first 3 minutes. If you can create a sense of value in 3 minutes, you're off to a great start.

4. Pinching pennies: COGS and Gross Margins are financial metrics that should drive the technology strategy; as Deming might have predicted, the ability to support a reliable, scale-able service at a low cost is becoming a bigger and bigger advantage.

5. Tier 1 support reigns: Now that there is less and less room for fancy, high priced consultants to answer the fancy, high priced questions, Tier 1 support will take on a bigger and bigger responsibility to represent the company and answer tough questions during the sales cycle. Will a good FAQ cut it? We doubt it.

6. More product alliances: SaaS vendors will dedicate more resources to integration partnerships with other SaaS vendors. Right now, they talk about it but they don't do it very well. Alliances may be the key toward gaining some share of the elusive "channel" for SaaS vendors.

7. Video trumps text: SaaS products will begin to use more and more video for training, support, documentation, etc. Itʼs cheap and easy and more interesting to look at. Text based tools are being replaced by A/V.

8. SaaS for SaaS: SaaS companies are going to start outsourcing more and more parts of their own operations. This is important because they can get the same kind of leverage from full service hosting providers that they provide to their customers. These kinds of arrangements will also lead to natural SaaS aggregations of applications into end-to-end partnerships.

9. Grid computing muddle: Utility computing remains an open question and will be driven by the cost to provide the service. In some cases, you may be able to get your monthly operating costs per user down to a low enough price that grid computing won't offer enough of a benefit. In other cases, it might provide just the kind of cost advantage that makes it worth the effort. In either case, SaaS vendors should build applications that are "cloud compatible" so that they can take advantage of grid computing when it makes good risk/reward sense.

10. Tech takes a back seat: There are fewer and fewer technical hurdles to get a SaaS application to market than when we started this in 1999. Now the emphasis is shifting more to marketing strategy; the technology, while obviously essential, is taking more of a back seat.


Demian Entrekin is Founder and Chief Technology Officer of Innotas .