Summary
Salesforce.com has built a great SaaS business but pressure will follow from major ISVs. SaaS is an announced strategy for several large software players. Technology leadership for Salesforce.com will become increasingly difficult but when is the question.
Analysis
The author states, "it seems likely that the gap would be narrowed rather quickly if it became a strategic initiative of one of these larger firms."
I'm not sure what "rather quickly" means but several large software players have already announced SaaS solutions and the gap has not materially narrowed. Noted companies pursuing SaaS solutions include IBM, SAP and Oracle. Although I agree with the author that the gap will narrow, it seems slow in coming.
Some of this apparent slowness is in the nature of software as a service. This is a subscription based business model, operating in an enterprise space. Most major competitors such as IBM, SAP and Oracle are traditionally strong in enterprise solutions. These kinds of software products are not easily replaced. Their processes are deeply entrenched in client companies. So even though a software subscription model is attractive and "on-demand" computing is a wonderful idea - big changes in big companies take time.
Salesforce.com however has come from the bottom of the market up. They sold first to small businesses and grew into mid-size companies. They are now making inroads into larger enterprise installations (AON, Alltell). These large deals are slow in coming but they are making the move. Hence, the need for IBM, SAP and Oracle to protect their strongholds. Each has announced solutions that provide hosted software services.
These major competitors will adopt the SaaS business model and it is a strategic initiative, but the change will be slow in coming.
