... radical new business model: Users rule. Software-as-a-service, or SaaS for short, beats out open-source and offshoring as the most disruptive aspect of the software industry, and the one that will most benefit IT users in the years ahead. At least, that's the consensus from within the industry itself, as expressed by a parade of participants at the Software Strategy Summit held in San Francisco last week by the Software & Information Industry Association (SIIA). The Washington-based vendor-advocacy group's research reveals that 67 percent of independent software vendors will be offering SaaS products in 2008. Sixty-three percent of these soon-to-be-SaaS-capable independent software vendors expect that by then, their on-demand revenue will exceed license fees from on-premises software. And most new SIIA members will get all of their revenue from on-demand software, if what Chris Hoffman claims is happening continues unchecked. Hoffman, director of research at TripleTree LLC, an investment bank in Minneapolis, says that almost all software start-ups are developing for the SaaS business model. "You can't get [venture capital] investment for perpetual-license software companies today," he says.

Russ Daniels, vice president and chief technology officer for software at Hewlett-Packard Co., adds that SaaS is fundamental to changing the corporate perception of IT as a complex world run by geeks to one in which tech departments are seen as "providers of a marketplace of services to the business."

IT's love affair with on-demand apps will continue because of their subscription pricing, predicts Tim Yeaton, senior vice president of worldwide marketing at Red Hat Inc. in Raleigh, N.C. The reason, he says, is that IT execs "get to vote on your product every year" when they decide whether to resubscribe.

Hybrid software delivery is better ...

... than SaaS alone for mission-critical IT. So posits Greg Gianforte, CEO of RightNow Technologies Inc. in Bozeman, Mont. Although 90 percent of his CRM customers go the SaaS route, Gianforte says that some IT organizations prefer to use their capital budgets to acquire software assets. If software vendors refuse to sell perpetual licenses, "they won't succeed with some large companies," he warns. Furthermore, SaaS advocates promote the benefit of upgrading software once for all end users, but Gianforte argues that the advantages go primarily to the vendors in the form of lower customer-support costs -- not to IT managers, who need to train users on universally available features. Gianforte describes that as "turning a Frankenstein switch on." RightNow's Hosting Management System lets users shift to new releases "on the date and time they want," he claims. Contrarian Gianforte also contends that although venture capitalists may not be financing non-SaaS approaches to software, they funded less than 1 percent of all new businesses last year.