For example, WebX Connect, now owned by Cisco Systems, is about to introduce a comprehensive collaboration offering aimed at helping highly distributed and global organizations in "bringing everybody together in a virtual space," West says. Salesforce.com has AppExchange, which provides services from several SAAS vendors through a common set of application programming interfaces. Axiom, a partnership of American Express Co. and Reardon, provides a marketplace of services for business travelers anchored by American Express Travel Services with a "tail" of about 1,500 partners on a single platform.

By combining multiple -- usually stovepiped -- sets of functionality on a single platform, these marketplaces can provide their customers with comprehensive usage data to support business intelligence analysis possibilities not available through traditional IT approaches. This is becoming another differentiator between SAAS and other alternatives such as traditional outsourcing.

7. How mature is the SAAS market?

The market is in its early high-growth phase, having passed the inflection point in the typical high-tech market scenario, West says. It's characterized by large numbers of fairly small vendors, with more entering constantly. In this case, the growth in the number of providers is being aided by some very large organizations, including Microsoft and IBM, and some small middleware vendors such as Progress Software Corp., which are helping business partners, particularly independent software vendors, move into the market.

West warns vendors that the migration from independent software vendor to SAAS provider is fraught with pitfalls, and he recommends that they seek help where they can find it. He recommends that users have contingency plans prepared in case their SAAS vendor fails. One difference between renting services and buying software and running it in-house is that if a service provider fails, the service could evaporate immediately, with no warning.

8. Is SAAS more than a flash in the pan?

"We believe it is the future of software, or one of the important elements in the future of software," West says. "You can't discount the traditional license model entirely, but certainly there is a strong argument economicswise that favors SAAS in the marketplace."

9. What, if any, involvement should service users have with the provider once the contract is signed?

"I think the user also should be very, very involved in the functional evolution of the SAAS offering," West says. "In other words, the user should participate actively in the user community, in the user conferences, because the evolution of the software is driven more firmly than in any previous generation of software by the feedback from buying community." In fact, some SAAS vendors have suggestion boxes built in to the user interfaces of their software.

"One thing about SAAS is a sense of community, and you should be prepared to be part of that community because it will pay back dividends," West says. "Continuous and aggressive innovation is a hallmark of a SAAS vendor in terms of their offering -- R&D that doesn't target two-year release cycles but is constantly looking at how to introduce new functionality. So they're on the lookout for feedback from their users, and they incorporate it whenever they can."

Bert Latamore is a journalist with 10 years' experience in daily newspapers and 25 in the computer industry. He has written for several computer industry and consumer publications. He lives in Linden, Va., with his wife, two parrots and a cat.