On-demand software is garnering attention among enterprises of all sizes. Software-as-a-Service (SaaS) is presented by vendors and the press as an alternative to traditional packaged applications. Info-Tech's analysis indicates that SaaS is viable for many enterprises. The SaaS marketplace as a whole, however, is immature. The vast majority of SaaS vendors are very small (less than $5 million in annual revenue) and will ultimately either be acquired by larger enterprises or fail completely. Consumers of SaaS products must factor this eventuality into their selection decisions.

The present analysis was prepared by exploring market dynamics for vendors listed at the SaaS Showplace. The analysis focuses specifically on pure-play SaaS vendors and omits traditional software companies that have targeted SaaS initiatives. Three specific questions are addressed:

• What types of applications dominate the SaaS market?
• What are the attributes of the vendors? Do they focus on applications or infrastructure? Are they public or...