Computer Business Review blasts Microsoft SaaS plans CEO Marc Benioff drew together several threads to make this hypothesis. These included Bill Gates’s announcement that he was turning his title of chief software architect over to Ray Ozzie of the now famous October 2005 Services Disruption memo, which stressed the importance of SaaS and Microsoft’s failure to grasp the change.

Benioff also cited the availability of service-based business-oriented email services from Google and Yahoo designed to compete with Microsoft Exchange, and the rise of service-based Microsoft Office competitors. These moves, plus moves by Oracle Corp and SAP AG and other enterprise applications providers to offer hosted services, were compounded by Microsoft’s hosting decision.

The world has changed. Everyone and everything is becoming a service, said Benioff. It was not so long ago that most executives and companies disregarded the movement to software as service, claiming it was limited technically, or isolated to a specific market segment such as small business. Now, everyone agrees that the future of software is not software at all, but rather an industry dominated by tens of thousands of heterogeneous services delivering everything from traditional Office productivity to verticals to VoIP to ERP and CRM systems. All companies and executives now agree: no software application will remain standing at the end of this widespread transformation.

The SaaS reality is that the transformation is not as advanced as Benioff makes out. With the exception of NetSuite, hosted ERP has not been widely adopted and productivity application services are emergent rather than established. Vendors such as Microsoft and SAP also see SaaS as an option rather than the sole solution. Microsoft describes its position as providing software and software services.

Applications are transforming, as Benioff asserts, but it is a matter of pace and SaaS and on premise software will co-exist for a long time yet. SAP CEO Henning Kagermann believes there will be a transformation but not a sudden shift. Microsoft aims to offer software and services and does not ascribe to the end of software view.

However, Benioff believes Microsoft has missed the boat on SaaS. Steve Ballmer has publicly fretted that he would not be ‘out hustled by anyone,’ but the fact is that Microsoft is being out hustled by everyone, he said.

Just as is hassling Microsoft, so fellow SaaS provider NetSuite Inc is harrying, disputing a story that one of its customers, Jobscience, was running its entire business using and AppExchange.

According to a statement from NetSuite: it turns out their definition of an ‘entire business’ is quite unique.

While Jobscience was using 30 applications integrated with, there was one little tiny application that wasn’t running on AppExchange, the statement continued. You know, that insignificant application that invoices customers, tells you if you’re profitable, lets you know how much cash you have in the bank, pays your vendors, and pays your employees, among other meaningful business activities. The truth is, Jobsicence’s financial system of record is not part of AppExchange. I guess JobScience could just unplug it and continue running ‘their entire business’ on, but then again, maybe not.