Web 2.0 gets a lot of attention these days. While the term encompasses many types of interactive technologies and user applications, one particular application that has taken off fast is that of online networking. These networks are designed to enhance information sharing and collaboration among users, as well as providing social aspects, such as developing new contacts.

Many would think of popular online social networking sites such as Facebook and MySpace as epitomising this trend, but business networking sites are becoming big business as well, such as LinkedIn and Plaxo. Just three months ago, the chief executive of LinkedIn announced that its latest, round D funding of $53m (£30m) meant that the company valuation was slightly over $1bn (£564m). And it is growing fast-according to Nielsen Online, the number of unique visitors per month grew 361 per cent in the year to April 2008, making it the fourth most popular networking site used today.

Having recently taken a look at how businesses can make use of virtual networks, Quocirca recently spoke to a technology vendor that is taking the concept of business networking further to provide a closed community for its employees and customers to interact - Callidus TrueConnect.

The value proposition in developing this is not to gain money from the network-although that could well be a by-product as customers are already providing feedback to help Callidus further develop its offerings and hence drive revenue upwards. Rather, Callidus sees this as an extension of the on demand software and services model that it espouses - allowing it to extend its customer service beyond the call centre to provide 24x7 interaction among employees and customers.

Some of the benefits of this for Callidus are obvious, as it can reduce customer service and call centre costs. But there are other benefits that are especially attractive for companies offering on-demand software services - especially in engendering customer loyalty. For many customers of these services, the value proposition is that they have lower upfront investments in software licences and, in many cases, the hardware required to run applications, as well as reduced costs for running and supporting applications. And they are also not tied in to long-term subscriptions, meaning that it is much easier to switch to another supplier.

Lack of customer loyalty and ease of switching supplier could be seen as the Achilles' heel for the on-demand model, making customer service all important. In building this community, Callidus aims to aid its clients not only through direct support, but also by providing pointers to best practice examples from the customer base and allowing people to help each other with support issues in chat forums. Some customers are even going further, setting up their own networks within the TrueConnect network (Callidus TrueConnect), some of which are private and can be used for collaboration and discussion among their own teams worldwide. Hence, they get their own on demand network - without having to build it themselves.

By its own estimates, more than 50 per cent of Callidus' customers are already using TrueConnect, some of them daily, and it claims to have customer retention rates of more than 90 per cent. That puts it among the best performing of on-demand software vendors - and it hasn't finished its plans yet. For example, as it continues to build out its network, it has plans open it up to partners and prospects in the future, and may even allow participants to moderate events held on the site, increasing the value of an already successful proposition.

By Fran Howarth