Editor’s note: WRAL Local Tech Wire has added another feature with the "Innovation Exchange." Noah Garrett, former director of communications for the North Carolina Technology Association, is a creative spirit, from writing music to news stories, who owns and operates NGC Communications. The focus of the Innovation Exchange is just that – creating a Web community through which people can exchange ideas and foster creativity.

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CHAPEL HILL, N.C. – Have we reached a plateau in software-as-a-service (SaaS)? The maturity level is much higher than a year ago but better days are still to come, according to a panel of experts at Wednesday’s Internet Summit at the Friday Center.

We here at the "Innovation Exchange" have a secret love affair with the SaaS model. It’s been the topic of many posts and continues to be one of the hottest trends happening in the Internet marketplace.

SaaS is typically thought of as a low-cost way for businesses to obtain the same benefits of commercially-licensed software without the associated complexity and high initial cost.

Consumer-oriented and Web-native, many types of software are suited to the SaaS model, where customers may have little interest or capabilities in software deployment but have substantial computing needs. The delivery model also is unique because customers do not pay for owning the software itself but rather for using it.

Gartner predicts the global outsourcing market will grow 8.1% by the end of 2008. This growth will not be in the form of traditional IT business processes, but instead fueled by the growing acceptance of SaaS and other managed services offerings by companies of all sizes.

In a packed-to-capacity room on Wednesday, renown venture capitalist Kip Frey, partner at Intersouth Partners, moderated an informative panel of SaaS experts that included Duke Chung, CEO and president of Parature; Lee Prevost, president and co-founder of Schooldude.com; Steve Wiehe, president and CEO of SciQuest; and Travis Janovich, president of E-Tix.

Throughout most of the discussion, the underlying theme remained the economy. It’s top of mind for everyone these days, and most see SaaS as a critical component for software developers to survive in our current economic downturn.

"There’s a whole lot more depth to Software-as-a-Service now and a lot of niche and vertical markets available … I feel that SaaS is great for this economy and a differentiator in our market," said Prevost from Schooldude.com.

Industry insiders estimate 10 million companies will be using SaaS worldwide in the next five to 10 years.

Research indicates that return on investment (ROI) is the most important factor when making technology purchasing decisions. Today, decision makers must make the most of scarce resources and at the same time respond to ever-increasing demands for improved performance and new technology.

These competing demands generate close scrutiny for new technology investments.

As SaaS providers look for more innovative ways to gain competitive advantage and increase operating profits, the outsourcing of network operations, application hosting and service delivery is gaining traction. More are continuing to re-evaluate their value chain and use a SaaS approach for profitable growth.

"There is still a lot of opportunity with SaaS," added Chung of Parature. "It’s really a race for companies to get products to the web. The beauty is the customer retention rate. If you build it into your model early on, you can continue to fund your business during difficult economic times."

A study released by McKinsey & Company earlier this year predicted that while SaaS and Service-Oriented Architectures (SOA) are currently on parallel development paths, many expect them to converge in the future – paving the way for a "tremendous battle between the largest software vendors and the newer SaaS providers."

Going forward, it will be interesting to see a year from now what SaaS experts will have to say about this trend and where it will be. But, for now, SaaS is good.