I was invited to a dinner with some of the management team last night. This was the third year in a row that the company had held a little get together for key customers, IT analysts, and members of the press. In previous years, CEO, Marc Benioff himself to lead the festivities. This year, he was called away and wasn’t able to join us…oh, well. I will have to wait until next year. I actually first met Mark when he was a business unit head at Oracle. He left Oracle in the late 1990s to start Salesforce.com. In fact, I was one of the early testers of the beta version of Salesforce.com. It was certainly a different product in those days when it was focused on the single end user who wanted to keep track of contacts in a usable way.

The company has come a long way. It is impressive to look at what they have accomplished in a few short years. Salesforce.com not only has 35,000 customers but it has created an ecosystem of partners within the realm of software as a service. In fact, I am seeing established enterprise software companies such as Informatica becoming partners (for data cleansing). Even more interesting is the raft of startups that are tying their fortunes to the salesforce.com platform.

At the dinner meeting I had the opportunity to sit next to the CIO of an important Pharmaceutical company who informed me that software as a service is becoming the lynch pin of the company’s software strategy for non-security related tasks. The company heavily uses both Salesforce.com and Workday as its ERP system. The main reason for choosing SaaS: the need to reduce expenses both for licenses and personnel.

In my view the question is not whether Software as a Service is real — it is. The question is how well the new players like SAP, IBM and Microsoft will perform as they point their marketing machines at the market.