On how traditional software companies will have to change to tackle the challenge on SaaS:
To be successful, vendors will have to understand the rules of the new game, especially how customer service and sales models differ, and adjust accordingly. They’ll need to grasp why software is moving to this model and how the new economics affect customers, intermediaries, and providers—not only software developers, but also IT and business process outsourcing providers. They will have to make changes in their own organizations by ramping up their ability to deliver software from large data centers and by developing new ways to sell to and service their customers. The sooner software companies embrace the change, the better access they’ll have to top talent and new markets and the better off they are likely to be in the long term.
The first wave: “… human-resources applications such as CRM and payroll and for collaboration tools that aren’t mission critical, involve relatively low data security and privacy concerns, have a distributed user base, and require little integration with on-premise applications and little customization”
The third wave: “… applications (that are) more critical to business, such as hosted environments for software development”
Finally, the fourth wave: “… new classes of applications which are actually better suited for online delivery and seamlessly integrate with on-premise applications… (such as) spam- or virus-protection applications, which are superior to e-mail filters because they stop junk e-mail or harmful viruses before they enter a company’s fire wall.”