SaaS adoption is rising with a poll of 120 Australian IT executives released Thursday showing 41 percent will increase spending on this delivery model this year.
Released by ACA Research, a further 85 percent will consider buying SaaS over on-premise software.
Saleforce.com Japan vice president for marketing, Jeremy Cooper, said traditional on-premise software vendors such as Microsoft will have difficulty adapting to this new environment.
"Microsoft will need to abandon entrenched [premised-based software] values if it wants to succeed in SaaS, which means changing its technology, business, and cultural models," Cooper said.
"They survive primarily on profits made in securing a customer for the long haul with consistent revenue in maintenance and support.
"A history of delivering premised-based software means they will be vulnerable to customer attrition which is a big consideration in SaaS because they are not tied to the old software model," he said, adding that access-driven models demand customer focus.
Responding to the claims, Microsoft Australia business solution product manager, Ross Dembecki, admitted there may be some difficulty for premise-based software vendors, but Microsoft won't be one of them.
He cited Microsoft's Hotmail and the upcoming CRM Dynamics Live release as proof of the vendor's ability to adapt.
"Traditional on-premise CRM vendors are likely to have a hard time offering SaaS because of lack of experience in scalable, reliable Web-based service delivery," Dembecki said.
"However, Microsoft has a rich history in building and operating massively scalable data centers like MSN Hotmail, while the new SaaS Windows Live data center will host Microsoft Dynamics CRM Live as an alternative to our on-premise Microsoft CRM."
Gartner analyst Rolf Jester downplayed the claims.
He said vendors such as Microsoft will not be stricken by the on-demand model because they draw considerable revenue from professional services like training and maintenance.
"Microsoft will not abandon their customers if they enter the SaaS market," Jester said.
"While there is some value in the arguments between the delivery models, SaaS isn't just about established software players.
"We are seeing new kinds of highly customer-centric services as the world shifts toward an access-rather-than-ownership model."