Last week at Salesforce.com’s Dreamforce conference, it was interesting to see how their Platform-as-a-Service offering, Force.com is starting to gain momentum among the Independent Software Vendor community including Computer Associates and BMC Software.

What is clear for traditional software providers who are starting think seriously about getting into the SaaS and Computing arena, it might be cheaper and faster to use a partner platform than trying to re-invent the wheel.  Both CA and BMC have resources to rewrite their older applications but it isn’t the cost that seems to drive them it is the time to market.  Force.com can provide a real advantage to software firms who have the domain expertise but lack the infrastructure and skills required to write Cloud and SaaS-based products quickly.

Other interesting aspects are that traditional ISV’s are not rewriting the old applications they have, they are re-inventing these applications leveraging newer development techniques.  CA’s Agile Planner is actually filling a hole in the company’s product portfolio and could be a logical cross-sell or up-sell product for them. BMC’s Service Desk offering is designed to dove tail with Salesforce’s Service Cloud 2 offering, and provide something else ISV’s are looking for, leverage.

I am sure that many traditional software firms will have the internal discussion about build, buy or partner their way into SaaS.  Up until recently there hasn’t been a good partner alternative for ISV’s who wanted to build their own solutions but were looking for a partner with SaaS and Cloud Computing expertise.   Even though rumors abound about Oracle looking to buy Salesforce, firms competitive to Oracle like CA and BMC are dipping their toes in the water.

For these firms leverage doesn’t just stop at the platform, Salesforce delivers a very effective go-to-market capability that few other partners can offer.  Witness the 19,000 participants at Dreamforce.  This type of reach and ability to get IT and business buyers attention might make a bet on Force.com worth the risk.  More importantly, these firms are also looking to bridge their older brands to the Cloud by bridging the Salesforce brand power.  CA and BMC aren’t the only firms interested in upgrading their image how about Dell, Callidus, Fujitsui (Glovia) and the momentum is growing.  According to the AppExchange, there are currently more than 200 native Force.com applications currently available.

While at Dreamforce I spent some time with the FinancialForce.com team at the booth and this is a really interesting story.  FinancialForce.com is a wholly owned subsidiary of a European software firm, Agresso and their CODA division.

FinancialForce.com was started about three years ago at the time that Salesforce.com initially launched the Force.com platform. Jeremy Roche the CEO at FinancialForce.com, reached out to Marc Benioff to just learn on how to build a net-new SaaS product and learned about their platform. They had a number of discussions and then finally decided to build their new accounts receivable product on Force.com in 2006.

The CODA team started out by building an integration connector Saleforce.com and the CODA2Go (On-demand version) of their Accounts Receivable module. They wanted to understand how the products worked together and that required workflow between products. It took them about a year to get comfortable with the Force.com platform, there were issues that were specific to complex ERP-like applications but Salesforce was responsive and did update the platform to support these deficiencies.

Once the new company was formed, FinancialForce.com, CODA then built out an Enterprise Service BUS (ESB) to connect their SaaS solutions with their on-premise solutions. One of FinancialForce.com’s early customers, a UK-based newspaper, were using Salesforce for their CRM requirements and CODA for their back office financials but were custom developing an invoicing/AR solution. When approached about the FinancialForce.com AR module as a possible solution, what was appealing to the customer that this solution was able to integrate to both Salesforce.com and CODA. About 6 months ago FinancialForce.com also launched their General Ledger and Accounts Payable modules and now they have a solid SMB mini-financial suite.

As more partners begin building and launching applications and businesses on top of Force.com, it is clear that the momentum is building.

After working at Oracle for almost five years in the early 90’s, I can tell you that when Larry sets his mind to something he usually gets it.

Let’s take a trip down memory lane…

It started by just plain beating your competition at sales and marketing.  Remember, crush Ingres, destroy Informix, smash Sybase … they were close to dead and Larry let them slip away.  He would have obliterated DB2 and SQLServer but IBM and Microsoft were too big.  Still he ended up owning the database market.

With the database market securely in his grasp, he started looking to other places where data resided… Ah, applications.   Larry had always said that Oracle didn’t care about applications and that they were focused only on the database market.  Then starting in 2005, he started his assault on the applications market first with Retek, then PeopleSoft, J.D. Edwards, Portal, Siebel and then Hyperion.  SAP is too big to take out and you still need an aspirational competitor anyway.

Humm… if you combine middleware into databases, you probably would sell more databases… then he acquired BEA and Agile.

In September 2008, Larry ranted about “What the Hell is Cloud Computing?”  Then just a few months ago Oracle buys Sun Microsystems and is arguably now one of the leading Cloud Computing providers.  I guess the ‘Network really is the Computer‘.  Now with his new toy Exadata, he is going after Teradata but when he gets his new toys from Sun - Java, MySQL, storage, grid computing, virtualization - he will have a lot of Cloud Computing fun.   It will be interesting to see if Oracle keeps the hardware part of Sun or spins it out to his friends at HP.

So now we come to SaaS.

The battle between mentor and protege.  Marc Benioff, with the help of Larry Ellison, has done a phenomenal job launching the leading Software-as-a-Service firm, Salesforce.com and creating the entire SaaS industry.  At Oracle’s earnings call last week Larry claimed that although Salesforce.com is the largest SaaS firm at $1 billion annual run rate, and Oracle is now the second largest SaaS provider at an $750 million annual run rate.  This included some high profile wins for their CRM on-demand offering last quarter including NetApps, McAfee, Land O’Lakes and Conoco.   But I can imagine that Salesforce.com won their unfair share of the on-demand CRM deals last quarter.

Oracle Fusion finally arrives.

What I found interesting is that the new Oracle Fusion suite of applications is now code complete and in beta.  This means it will be available from an Oracle sales rep near you in the fall. Oracle Fusion is on-demand ready and will offer three delivery models; traditional On-Premise, SaaS and then there is On-Premise SaaS.   On-premise SaaS, is that like military intelligence? This is usually and incredibly bad idea unless you are a $23 billion dollar company that generates more than $5 billion in profits.  The new Oracle SaaS suite will all ERP modules including CRM and HCM applications focused mainly on F1000 sized organizations.

Even though Fusion might be a positive development for the Oracle On-Demand sales team, it is doubtful this will be enough to enable Oracle to control the SaaS market organically.   So look for Oracle do what they have always done when they want to control a market, buy their way to the top.  That would mean that some Oracle alumni’s like Marc Benioff or NetSuite’s (Larry and his family own a majority of Netsuite) Zack Nelson will probably be on Uncle Larry’s radar screen.  This is just like other Oracle alumni’s Craig Conway from Peoplesoft - who is also on the board of directors of Salesforce.com and Tom Siebel were pursued.

I guess in the end if you can’t beat’em, join’em.

Looks like someone is assuming an attack formation … the end of 2009 should be very interesting for the ever-evolving SaaS market landscape.