I was in the Bay Area for a few days last week for some meetings and had a great chat during my visit with someone who really gets software-as-a-service from an investor perspective.  We hit a couple of core themes during our conversation including the notion of “consumption.” 

Enterprise software has not been easy for business users to consume in the past.  It required software, servers, consultants, and extensive configuration as well as the lead from IT to get it in the hands of the business end-users.

In the past it was about business users using software once it was set-up.  Now it is about business users individually consuming software and realizing the business value first.

This puts a new onus on any company wanting to successfully penetrate the enterprise with software and do so while avoiding bloody and bruising 18 month sales cycles.

Get all or some part of it into the hands of the business end-users first and have them begin to rely on it.  When the time comes to talk about a broad deployment that needs IT attention it has almost become predetermined.

This approach is made possible by the ability to deliver software via the internet (SaaS/on-demand).

This article came out a couple weeks ago and I have been meaning to do a post around it for some time.  It’s an InformationWeek article on SaaS integration that highlights three companies positioning to address the need – Boomi, SnapLogic, and Cast Iron.  We continue to see needs around this in the marketplace and after a bit of research and outreach, I believe the problem falls into two related but distinct categories:

1  Data extract/upload

This is predominantly for those applications that need to pull something out of an existing on-premise application and transfer it to an on-demand application once or with low frequency (think batch or asynchronous).  We can do this but our core competency is not in data extraction and this is better served by on-premise integration products or defined adapters.  In fact, many of the SaaS application companies we spoke with were using the usual integration broker middleware products for this along with their own consulting folks to get new customers connected.  Yes, this approach works but it doesn’t scale (see below).

2. Transactional processing

This is for those applications that require real-time/near-time information flow between on-premise applications and on-demand applications.  eProcurement, epayment, and supply chain applications currently fit here and this can also include multi-party information flows between two or more separate companies as well as more sophisticated business rules.  An example of this is using an on-demand CRM application to create quotes based on catalog and pricing information that exists in an on-premise enterprise application.  A single company has the need but the information flows are frequent and real-time/near-time.

Hubspan has a unique perspective on this challenge coming at it from an inter-enterprise background.  After the initial extraction and uploads occur, my view is that the needs (and approach) will evolve and become more transactional in nature for all on-demand applications. 

Until then, there is plenty of room in the pool for everyone…

Great post by Jeff Kaplan over at THINKStrategies on the difference between cloud computing and software as a service (SaaS).

Jeff should know…he’s been working in this space for some time and is really knowledgeable in addition to being a super nice guy.  If you are selling, buying, or building on-demand applications or services, put Jeff on your list for a chat.

He also did a profile piece on Hubspan recently.  Go here to get the download.