These include call-center contact management firm RightNow Technologies, business applications providers NetSuite and Intacct, employee performance management firm SuccessFactors, and expense management outfit Concur Technologies.

SaaS is also making inroads among the world's largest software companies with banner-name developers moving to become, or at least rebranding themselves as, SaaS players. In the last 12 months alone, SAP, Oracle and Microsoft have introduced major initiatives, while Cisco has acquired WebEx for its web-based conferencing service.

SaaS strategy

Many firms still view SaaS as a tactical offering for small and medium-sized companies but that is changing. RightNow is aimed squarely at enterprises and can list British Airways, T-Mobile, Vodafone and many other brand names as being on its impressive customer roster. Also, NetSuite has thousands of seats at Carphone Warehouse, Concur sites include IKEA, and SuccessFactors counts Kimberley-Clark and Radio Shack among users. Underlining the scale of these providers, NetSuite and SuccessFactors have recently floated on the public markets, joining veterans such as Salesforce and Concur.

Despite these success stories, critics of SaaS still snipe that, even in the case of many large organizations, the CIO is bypassed in order to address the short-term tactical needs of sales, marketing or other divisions. Defenders counter by saying that might have been true once but now is the time for CIOs to get involved in the SaaS action.

"The lines of business brought us in to solve problems but then we had to deal with the CIOs," says Zach Nelson, CEO of NetSuite. Nelson believes that fewer CIOs are today resistant to SaaS because they realize that it is no threat to their power bases or opportunity to innovate.

"All you're really outsourcing is grunt work that should have been done by the vendor," he claims. "Installing the software and tuning it doesn't make the organization better. The original vision of IT was that it was to be a business partner. Now, IT really can be that and CIOs don't have to worry about the basics. The transformation is towards these guys [the CIOs] becoming business experts. The question becomes 'how do you run the business' and not 'how do you run the database'."

John Appleby, CEO of SaaS consulting firm Saaspoint, agrees that the decision-making process is changing.

"More and more frequently, the CIO is involved in the decision regarding SaaS," he says. "Before it was the sales vice president, sales operations [leaders] and customer support managers who we would speak to. In fact, the IT department were the last people we would speak to because it was like trying to tell a turkey how good Christmas was. Now, the IT department really embraces SaaS. Also, [CIOs] want to have SaaS projects on their CVs. If you are a CIO who really wants to deliver solutions, this is manna from heaven. As Salesforce.com says, we're allowing the CIO to mean 'chief information officer' rather than 'chief infrastructure officer'."

Appleby argues that the questions being asked about SaaS are also changing from earlier in his career when he worked at Salesforce.

Good security

"It's probably unfair to say [early CIO scepticism over SaaS] was people looking after their personal fiefdoms. It's fair to look at issues such as security and availability and ask questions -- and these questions have now been answered. Customers eventually realized the level of security Salesforce could provide was greater than what they could do themselves."