Hosted applications continue to get more press as time goes on. Similar to the e-commerce space, this market saw a slew of new entrants during the bubble times and many of these companies subsequently crashed and burned. Obviously, having application service providers (ASPs, remember that term?) drop like flies was not conducive to customer uptake. During hard times, the industry evolved from a time when the term “ASP” was ubiquitous to a situation where venture capitalists actually told companies to not use those banished initials.

ASPs operating in the 2001-2003 time-frame were advised by financial backers to stop identifying the industry in which they played, since doing so might lead to difficulty acquiring new customers. This is likely why the term ASP is now gone and we use terms like hosted, on demand and software as-a-service (SaaS) instead.

Over time, companies have gotten more comfortable with e-commerce and the hosted model. One of the poster children for the latter is certainly SalesForce.com. Just making it through an ASP, tech and telecom depression speaks volumes about the company.

Once, Tom Siebel — the much-respected brains behind Siebel Systems — publicly stated SalesForce.com wouldn't be around for long. Despite that lack of confidence, SalesForce.com has apparently thrived as the underdog. But is the company still an underdog?

 

SalesForce.com founder Marc Benioff (News - Alert) has told me in the past he wants to see his company grow to a billion dollars in annual revenue. Certainly the hosted CRM leader is no longer small but this just means it has decided to focus on going after bigger competitors.

Of course, the alliance SalesForce.com made with Google attracted a huge spotlight on the company. To get a handle on the future of the hosted CRM company and what the Google (News - Alert) alliance means to customers, I traveled to downtown Manhattan where I spoke with Bruce Francis, the company's Vice President of Corporate strategy. You may recall, I last interviewed Francis in the summer of 2006.

Francis was candid about the Google news. He told me that his customers want to be free of the software burden. Many of them started with hosted CRM and are now yearning for SaaS solutions to replace the rest of their in-house software as well.

"It doesn't hurt that the incumbent software maker has rolled out the most disastrous upgrade to Windows ever," he said, referring to Microsoft Vista. "Who wants to deal with this anymore?"

From there, Francis explained how there has been a shift in the market where enterprise users used to be so far ahead of consumers in terms of their technology adoption. He sees a world now where consumers are way ahead of the business market. Now, consumers have Web 2.0 and 3.0 and seem much further along than most businesses.

According to Francis, "Businesses are saying, ‘What gives? Why am I using the greatest [software] hits of the mid-decade of the 20th century when my consumer life is so much better?’."

He went on to explain with much enthusiasm that this is the opportunity his company, in conjunction with Google, is taking advantage of. From there he discussed a bit of how much easier it is to collaborate on shared documents using hosted services.

Referring to collaborative software, he said, "Traditional vendors like Microsoft (News - Alert) do not understand and show no potential to do so."

I mentioned Microsoft's SharePoint server product as one of the ways Microsoft is addressing this matter. He responded, "It is one of those products that millions have but thousands use and no one loves."

In the past I have heard some negative comments on SharePoint and I didn't really have a list of happy (or unhappy for that matter) customers to bring up during the interview. I have been meaning to test SharePoint out at TMC (News - Alert) and hope to do so in the future. It is worth mentioning that after the interview I did do some digging and was able to pull up a number of positive comments regarding the latest version of SharePoint.

Coincidently I have also been informally testing some of the hosted services Microsoft offers via the company’s Live initiative.

I believe the problem for Microsoft is a lack of a clear SaaS strategy and moreover a concise market explanation. It has a number of hosted and collaborative initiatives and if it is tough for me to rattle them off, one wonders what customers need to do to keep up.

But getting back to SalesForce, I asked what will come of the Google collaboration and Francis responded, "I don't know." Those who know me well know it is challenging to make me speechless. But sure enough — I wasn't sure how to respond. I told Francis this was not the answer I expected.

He said it isn't him or anyone in the company who necessarily directs how the collaboration with Google will proceed. He told me the answers I seek are at ideas.salesforce.com, the user portal for the SalesForce.com community. This is where you can go to share suggestions and improvements to the company's services. This technology is not only powering the growth of SalesForce.com but Dell and Starbucks too are now taking advantage of SalesForce.com's services to ensure they can get  customers to collaborate in making those services better.

I checked this portal and found a great recommendation to get SalesForce.com working with Google Gears. There were lots of other interesting ideas there as well.

Francis also pointed me to companies like Astadia who built an application which integrates a quote generating service between Salesforce.com and Google applications allowing you to use Gmail to e-mail a custom quote to a customer.

From there, we discussed how the company's goal is to get as many companies as possible to use their hosted platform to develop applications. He mentioned Coda, an accounting software vendor out of Germany who decided to use the AppExchange as the basis for their hosted offering. He explained the company is able to utilize one-third the resources in pulling off its SaaS product while leveraging the database, logic, workflow and other features that SalesForce.com has perfected over the past nine years.

He emphasized that he hopes thousands of companies will take advantage of the platform as a service model.

I left enthused about what SaleForce.com is doing. The company seems to have great market position, and its recently-enhanced relationship with Google doesn't hurt.

As always, you can never count Microsoft out as the company thrives on competition. Its hosted solutions have been under the radar but it is not like the Redmond-based software giant doesn't have the resources to compete effectively using increased marketing and branding.

In the short term however, Microsoft may be very distracted with the Yahoo! acquisition (assuming it tries to purchase the company again or instead tries to duplicate Yahoo!'s products and services) and it is during this time I expect SalesForce.com to be working as hard as ever to ensure it gains as much traction as possible across the spectrum of hosted services.