I had some interesting conversations this week at an analyst meeting focused around SaaS. Nothing too surprising that this should be the subject of the day as it was the first time that Salesforce.com had held an analyst pow-wow in Europe. Now whilst Salesforce.com's executives discussed the trends as they see them in the market and the remarkable success that the company has enjoyed, the day did throw up a few interesting questions including the thorny, and probably always to be shrouded in fog, just what set of features / capabilities / business models defines "SaaS" as an entity? Or is it in reality a number of related entities rather as organisms that, from a common starting point, may evolve to fill a range of ecological niches effectively creating similar, but subtly different, sub-species en-route? Whilst discussing this at Freeform Dynamics after the event one of my colleagues, David Tebbut, posed an even more intriguing question, namely how can you tell a good SaaS vendor from a bad one?

On the first matter it is clear that the SaaS industry has succeeded in growing perhaps because it has managed to adapt itself to many, slightly offset, models both of service delivery and business operation and income generation. So what then defines SaaS? Well clearly there is the element that the entire service is provisioned, hosted, updated and administered by another entity entirely. Although some internal IT units could argue that they are attempting to take the same approach for their "customers" I shall not consider them further at this point. There then comes the question of application ownership. In the SaaS model it is apparent that the application must be "owned", or at least that financial responsibility for the software licenses, is held by the SaaS provider rather than by the end customer; if it were otherwise we would simply be looking at another version of "hosting" or offsite managed services.

We then come to consider the issue of payment models. A major factor behind the current success of SaaS suppliers such as Salesforce.com, NetSuite, Oracle and Citrix lies in the subscription approach that customers employ to pay for the services. This week, Lindsey Armstrong of Salesforce.com, took some pains to make the point that "subscription" is not only about paying for service on a monthly or quarterly basis. There is perhaps the far more important characteristic of flexibility that the subscription model can offer, namely that it is simple to add additional services and perhaps users, even for a relatively short period, without any concern on the customer side for how the supplier handles the scaling and license acquisition / disposal. And this latter area of flexibility is one where Salesforce.com, especially its Force.com platform, will really need to educate, not only to potential customers but also to ISVs and possible channel partners to create and take solutions to market.

On the question of how to tell a good SaaS vendor from a bad one, well there is, I am afraid, no substitute for putting in the hours and taking the effort to ask all the questions that need to be asked. This is no different from doing business with any supplier, except to add that as so much information and value may end up being embedded into the SaaS solution utilised that even more diligence should be expended. Alas, as we all know, getting the time to do such research is extremely difficult for any IT professional to do. Maybe there is a need for some form of independent SaaS supplier standards body to be created to give guidance and set standards on quality of service, security of information, stability of supplier and perhaps even to offer some form of "escrow" protection if a supplier fails to ensure that customers can retrieve their business data in times of crisis. I do not see such a body arriving soon, so caveat emptor applies. Check as carefully as you can and then check again.