Hosts vie for CRM top table

Salesforce.com finally floated on the stock market last week as rivals jockeyed for a position in hosted software. Some watchers believe that the firm's initial public offering marks a watershed in the shift from locally installed to online software deployment.

Salesforce, an online customer relationship management (CRM) software provider, has twice postponed its offering, but gained public status on Wednesday and immediately surged in value.

As well as helping to regenerate the high-tech stock market, Salesforce's debut will assure customers of the firm's future at a time when many observers expect a wave of mergers and acquisitions in software. The ongoing US Department of Justice investigation into the proposed Oracle-PeopleSoft merger has revealed that Microsoft had merger discussions with SAP, and Oracle considered Siebel, BEA Systems and others before settling on PeopleSoft.

Salesforce is the most high-profile firm to have succeeded among so-called application service providers (ASPs), whose customers access services over an internet connection rather than installing software internally.

Proponents of the ASP model say it saves time and cost in deployment.

"You have no box or apps to support or administer," said Russell Flower, head of managed services at IT services firm Synstar, which uses Salesforce to support 200 staff across Europe. "ASP has grown up and has a purpose - who wants to develop an ERP [system]?"

Another fast-growing host, NetSuite, last week introduced NetCommerce, a web store/ERP service. Chief executive Zach Nelson said Salesforce's float underlined a shift in the way firms deploy IT systems.

"I see it as like 1986, when Microsoft and Oracle went public and there was the shift to client-server," he said. "There's a huge change towards hosted software because 20-year-olds are growing up with an entirely internet-based view of the world. For a while, firms like PeopleSoft will be able to baffle customers by having hosted versions but only software designed for [online usage] will succeed in the long term."

Firms such as SAP and Oracle have also stepped up their online offerings in the past few years, while Siebel said it had over 500 trials in the first 10 weeks of the Siebel OnDemand service in Europe.