Last week, Salesforce.com released its plans for the Marketing Cloud, a new identity management offering and a Dropbox-like feature for the enterprise.

Yet, one item that garnered much of the attention at the annual Dreamforce user conference was IT analyst firm Gartner’s report that by 2017 the CMO will spend more on IT than the CIO. Salesforce.com CEO Marc Benioff mentioned it several times during the conference. In fact, Benioff thinks Gartner may be too conservative.

“Personally I think it’s going to happen faster than that,” Benioff said in a question and answer session with the press. “I think Gartner is maybe underestimating.”

That sentiment is not surprising given how much Salesforce.com spends on marketing itself, not to mention its recent acquisitions of BuddyMedia and Radian6. Still, it’s clear Benioff believes in the trend.

“In many ways the CMOs are becoming the number two officers in the company right behind the CEO,” he said. “They’re flying these expensive jet fighters and they need a cockpit and they don’t have that. We bought a billion dollars worth of companies to give it a go.”

But do others agree? Clearly there are doubts. Frank Scavo, of Constellation Research, voiced his skepticism on Twitter and found some fellow doubters. Barb Darrow at Gigaom ponders whether putting the CMO in charge of IT is really a good thing.

There certainly are some factors putting pressure on marketing departments to modernize and automate, trends Benioff was happy to note during his keynote address. For example, according to research firm IDC’s worldwide collaborative applications forecast for 2011 to 2015, there will be a 47% annual growth in spending on social networking. According to an IBM survey of CEOs, social networking was cited as the most important way to connect with customers, and companies are having 150 million conversations a day with customers on social networks.

GE, which has invested heavily in Salesforce.com and its Chatter collaboration tool, would seem to agree with Benioff and Gartner.

“It’s already happened,” Ian Forrest, vice president of marketing for GE Capital, said during the conference. “The way I look at it is the CIO and CTO had everything because they owned the systems, the platform, the business rules, the logic, everything. And if you look at it today, today all the business rules and logic sit with the marketing teams. I just think it’s a trend that’s going to continue because the business owner now doesn’t have the gate of IT to develop the customer.”

Forrest, a marketer with a budget of his own, doesn’t want to wait for IT anymore.

“Logically as a marketer, you’re going to be thinking: How do I go faster? How do we go deeper? And you’re going to be a lot more reactive because you don’t have to deal with IT,” he said.

 It’s not like Salesforce.com is alone in chasing this trend, of course. IBM is hoping to appeal to marketing departments after buying Unica, Coremetrics and Cognos. Oracle, for its part, spent a reported $300 million on Vitrue and more on Collective Intellect. You now can count Adobe among that crew as well.

Whether CMOs ultimately outspend CIOs or not, it’s clear IT needs to take notice. As Michael Hickins points out about Salesforce.com in the Wall Street Journal:

The company’s customers may end up paying a price for its success. Salesforce.com may be reducing the overall effectiveness of its services, as its emphatic outreach to executives outside the IT department threatens to cause a fracturing of IT services within organizations, reducing the potential effectiveness of each of those individual applications.

Salesforce, with its emphasis on social software, is also increasingly emerging as a potential threat to the influence of CIOs. The vendor is brazenly circumventing IT and speaking directly to CEOs and CMOs. Burberry CEO Angela Ahrendts, GE CEO Jeff Immelt and GE CMO Beth Comstock, all actively endorsed Salesforce during this week’s conference.

Benioff acknowledged the challenge his customers may face with the rapid releases during his Q&A session.

“This is probably more technology than customers can assimilate,” he said.

If they can, it’s going to take both the CIO and the CMO to make it happen.

Lars Dalgaard, CEO of SuccessFactors, said this of SAP’s flagship SaaS offering during a question and answer session with press and analysts:

“Business ByDesign is a powerhouse, it just is,” he said. “But it hasn’t been marketed right, it hasn’t been positioned right or explained right and people haven’t been trained right. There isn’t much I can say that’s been done right.”

Dalgaard intends to change that. Pundits at the SapphireNow show here in Orlando are wondering how he’s going to change the culture as well. He’s taken up the customer mantra of co-CEOs Jim Hagemann Snabe and Bill McDermott.

“At SAP we’ve had too much PhD and too little customer,” Dalgaard said.

Business ByDesign will still be a sold as a suite to SMBs and divisions of larger enterprises, but the future of cloud applications at SAP is a modular one.

Lars Dalgaard at SapphireNow Courtesy SAP

In his keynote address at Sapphire, Dalgaard identified a four-prong approach to selling cloud apps: customers, people, money, suppliers.

The customer-focused cloud applications are already out with an upgrade to Sales OnDemand and the availability of a new social media tool (or the SAP Social Customer Engagement OnDemand solution if you’re, you know, not into the whole brevity thing). The people applications will be based mostly on SuccessFactors’ human capital management portfolio and was highlighted by the release today of a version of SAP’s cloud-based payroll system that integrates with SuccesFactor’s Employee Central. Supplier applications will be built off of SAP’s Sourcing OnDemand.

And the money applications?

Those will be based on existing work done by the Business ByDesign team, as well as new work being done by the developers at SAP who brought you R/3 and by developers at SuccessFactors, according to Dalgaard.

“It’s SAP’s God-given right to build financials in the cloud,” Dalgaard said. “It’s a very serious, very deep product. It’s a tiger in a cage. Today we let it out.”

The core difference is that unlike Business ByDesign, SAP’s cloud applications will be sold individually. That, Dalgaard said, is the way people buy clouds.

“They wanted to boil the ocean,” Dalgaard said. “The market wasn’t ready for a boiled ocean.”

 If that sounds familiar, that’s because SAP had already started down that path with Career OnDemand, Sales OnDemand and Travel OnDemand. It’s also the approach Oracle has taken with its Fusion Applications.

The link there is John Wookey, who in the merry-go-round of Silicon Valley, was head of development for Fusion Apps before moving to SAP to help build the OnDemand apps there, and is now at Salesforce.com, heading up application development. It will be interesting to see what comes from Salesforce.com two years from now when Wookey has moved on again.

Dalgaard vowed to continue to invest in Business ByDesign, but made it very clear that if it, or any other platform doesn’t perform, he’s ready to throw it out.

“If it’s not working, it’s gone,” he said. “I’m the first one to call out where the problems I find are.”

Given SAP’s checkered history with ByDesign, or its first OnDemand CRM applications for that matter, the market awaits the outcome.

Two weeks ago, the Wall Street Journal published a story about an increase in business travel expenses. It cited data showing that corporate employees were spending more on meals, entertainment and hotels, and doing it in style.

The data all came courtesy of Concur, maker of an online expense management system, which provided aggregate data from its customer base to the Journal.

While the exercise provided an interesting story for the Wall Street Journal and some good publicity for Concur, Software as a Service (SaaS) companies – and their users – are uniquely positioned to turn customers’ aggregate data into a real business advantage.

Most SaaS companies in the CRM market already provide some sort of benchmarking data to their customers — things like how often employees access the system, for how long – basic usage data.

For example, Salesforce.com provides monthly personal account review (PAR) updates to administrators which describe how well their company is using the system.

“We’ve actually been doing this for years,” said Scott Holden, senior director of product marketing for the Sales Cloud at Salesforce.com. “Because of cloud computing’s architecture and multi tenancy, we have data on how effectively they’re using our system.”

The PAR tracks 170 different metrics around customer success and adoption and benchmarks them across company sizes and industry.  It just doesn’t get much notice in a lot of places.

“I would call it an eyeball review,” Tony Cutler, Web and sales technical manager with Pelican Networks, a manufacturing company in Torrence, Calif. told me at the Dreamforce conference last week.

The monthly usage report doesn’t get very far past Cutler’s desk either. Business users don’t have much need for it.

“Part of it is relating it to the past,” Cutler said. “Users will say, ‘I don’t remember what you did last month. We’re a manufacturer. People are less likely to feel comfortable with data.’”

But what if Salesforce.com used that aggregated data to help Pelican Networks compare itself to other manufacturers of its size, or in its area of the country? What if Salesforce could provide comparisons along key performance indicators like how sales reps or contact centers are performing?

“That would be more useful in getting to where the meat is,” Cutler said. “There are two areas we’re concerned with, close rates and support tickets.”

That’s something Salesforce.com is considering, according to Holden.

It’s something NetSuite has planned.

“Obviously we provide benchmarking data on how the company is performing,” said Zach Nelson, CEO of NetSuite. “What we’re going to provide next year is the ability for a company to benchmark itself against other companies that use NetSuite.”

NetSuite’s customers include industries like wholesale distribution, services companies and software, tailor made for comparative analysis.

“So every one of those industries have a group of metrics that almost all those companies run their company on,” Nelson said. “What we’re going to do is allow those companies to benchmark themselves on those key metrics against all other wholesale distributors in our database to see how they rate.”

There are already companies that offer benchmarking data of course, it just requires participating organizations to compile their metrics by hand and send them on to someone else to aggregate, analyze and return. SaaS vendors can automate that process fairly easily with live operational data. Nelson plans to offer the benchmarking data as a free service.

“The more difficult part is not displaying the data, it’s identifying the key metrics that are common within the industry,” Nelson said.”And then the next generation beyond that is in enabling companies to tweak that data on second and third derivative issues of those key metrics.”

Benchmarking data is in fact the next big step for SaaS vendors, Liz Herbert, an analyst with Forrester Research in Cambridge, Mass., agreed.

“That’s where SaaS has a huge advantage,” she said. “The challenge will be how can they answer the privacy and security issues. [Clients] are fearful. They like the idea of benchmarking but they don’t like the privacy and security issue that goes with it.”

Yet, since the benchmarking data is aggregate and so valuable, Nelson doesn’t expect much backlash.

 ”I think the companies will want to share their data to get that feedback,” he said. “My view, from a selfish, NetSuite perspective, is it’s going to provide that flywheel where we’re only going to offer it to our customers. We’re not going to offer it to the outside world, so you’re going to be able to see how your company is operating compared to all software companies that use NetSuite.”

In the meantime, companies currently running SaaS applications shouldn’t be so quick to dismiss those usage reports they’re currently getting, Herbert advised, particularly when they’re approaching a renewal.

“How do they know if this is something they should renew at the same level,” she said. “You may have licenses for users who aren’t accessing the system.”

In fact, customers of on-premises software find themselves paying outside software vendors to give them insight into how well they’re using the system. SaaS gives it away.

Reading the various blogs and publications that cover the IT and business applications marketplace lately, one can’t help but wonder if the best way to get ahead in IT these days is with a law degree.

The latest comes from Gartner’s Michael Maoz, who relayed what he’d recently heard from some clients. They had “gag clauses,” or non-defamation letters, which prohibited them from publicly discussing their failed CRM implementations.

As Maoz writes:

I am not in any way suggesting that there is a hidden and massive list of horror stories. What I am stating is that the whole story of the complexity of SaaS deployments (where, for example, the product lacks industry template, and where there is a need to support multiple roles and complex sales processes) is not being told necessarily. The ‘Success Stories’ are heavily covered and written about. The glowing testimonials are at everyone’s fingertips. But what about the failures? Do you really think that they disappeared in the bad-old-glory days of CRM 1999-2004?

Suddenly IT and business leaders who, in the “bad-old-glory days,” could at least complain to their peers about their failed projects, now need to watch what they say lest they run afoul of the vendor whose software helped cause the mess in the first place.

Of course, once the project goes bad, that’s when it’s really time to release the sharks. Take a look at the well-publicized Marin Co. vs. SAP and Deloitte suit in which the county is seeking $35 million and even invoking RICO. Or, Waste Management’s lawsuit against SAP.

The vendors are plenty litigious themselves as well. Oracle sued SAP over TomorrowNow, HP sued Oracle over its hiring of Mark Hurd, Oracle sued Google, Montclair State sued Oracle and Oracle countersued Montclair State.

That’s a lot of legal bills and not a lot of innovation or successful software deployments.

In fact, it’s not a bad idea to get the legal department involved in the relationship with your software developer from the very beginning, given the complexity of software licensing.

I talked with Amy Konary, IDC’s pricing and licensing analyst yesterday and while she couldn’t point to any hard research or surveys indicating legal is taking on greater importance in IT, it sure looks like they are.

“Qualitatively? Yes,” she said. “The risk is higher than it has been in the past.”

There are a couple reasons for that. One is that license audits are happening more often and software license management practices have not caught up yet, Konary said.

If you’ve got the time, I suggest checking out Mark Fontecchio’s two-part series on Oracle license audits. Some of the language in these contracts can be incredibly opaque and trigger some common traps in an Oracle license audit.

Additionally, virtualization and cloud computing are changing a lot of the licensing math. Cloud computing has created additional licensing flexibility and has aligned costs with usage, but many companies have a hard time calculating how much they’re actually using.

In sum, most organizations are not built to deal with these issues.

“It’s like a game of telephone,” Konary said. “The procurement team that buys the software and the people that actually use the software are in many cases more removed than they should be from the buying process. Vendors are in an opportunistic situation. We know it’s hard to comply. It’s difficult even for legal people.”

So what’s the answer? Someone from legal that knows IT? Someone in IT with a law degree or training in negotiation?

“Because licensing crosses so many roles, you need someone who understands part of everything,” Konary said. “That’s hard to have in one role.”

In fact, she suggests an economist, someone who can model and sort through all the new ways there are to buy or rent IT resources, may be even more important.

In the meantime, people are calling for change. Konary is pushing for less legalese on contracts. Forrester’s Duncan Jones has plans for a “Software Tea Party,” and for years Constellation Research’s Ray Wang has promoted his Enterprise Software Licensee’s Bill of Rights.

Forrester’s CEO took the stage at the IT Forum in Las Vegas today and outlined his bold predictions for the future of business technology — and who will win and who will lose.

Citing Moore’s Law, which states that processing power will double every two years, and what he called “Hitachi’s Law,” the principle that the physics of storage technology allows storage to double every 1.2 years, George Colony said computing power lies at the center of a company’s IT structure, but also at the periphery.

As proof, he held aloft an iPad 2, which has the equivalent processing power of the Cray Supercomputer, which would have made it one of the top 30 supercomputers in the world in 1983.

The network however, is not progressing at the same speed, he added.

“While the center is ever more powerful, it also says that the periphery of the network is also becoming very powerful,” Colony said. “That will change the architectures we all use in the future.”

And the cloud model, while powerful and dynamic in its own right, does not take full advantage.

“A standalone cloud or Web solution is dead,” Colony said. “The Web is a dead technology, it is not the future architecture of the Internet. The architecture that’s going to dominate is going to take advantage of high power at the center Internet but also the periphery where applications reside.”

That future architecture, Colony called the App Internet.

Eventually, every device will have an AppStore, Colony said. There’s going to be app stores on every single device whether it’s on a PC, and iPhone, or a car.” As an example of the emerging shift, he pointed to USAA, the Texas-based insurance company which is shifting development away from the Web and toward mobile applications.

Winners and Losers

Colony also presented a Forrester Wave for the App Internet, though he called it a “Wave Lite” with only two weeks of research devoted to it rather than the months that a Wave typically requires. And he didn’t spare barbs for many who are undoubtedly Forrester clients.

The poor performers in Colony’s Wave are those reliant on the Internet.

The Leader

The leader, to no one’s surprise was Apple, though Colony did not exactly praise Apple for its long-term vision. 

“I think this company is very lucky,” Colony said. “Why are they in the App Internet business? Steve Jobs initially said this is a closed device. It took months and months to let people [build applications for the iPhone]. They kind of fumbled in to this app internet architecture.”

The Risky Bets

 Google – “Google would like it if the world would stop spinning. I have Google as a risky bet because they’re so Web centric. I thought that the [Chrome book, an entirely web-centric computer] was one of the greatest acts of corporate idiocy I’ve ever seen.”

HP and Dell – “They’re already in the powerful periphery device business but can they reform the PC to live in the App Internet world?”

SAP and Oracle – “I think these guys can get traction pretty quickly in the App Internet. The problem will be pricing.”

“Microsoft and their little buddy Nokia” – “Microsoft gets it to an extent with variable pricing, all cloud to all data center. Also Silverlight could be a fantastic development platform for the App Internet.”

The SaaS Horde – Lots of them are at risk. “Find a successful SaaS company, go out and build and App internet of that company you could make a lot of money.” 

Renren (the Facebook of China), Baidu (the Google of China) and Yandex (the Google of Russia) — Wall Street is pricing these at very high numbers but they’re vendors of the past not the future.”

The Contenders:

RIM – “RIM has a tablet; the problem is that doesn’t work unless you have a BlackBerry.”

IBM – “IBM is in the services business. If there’s a fantastic play for the App internet it’s the services business.”

The Strong performers:

Salesforce.com – “They quickly responded to the iOS and Android challenge. Now we have ability to access Salesforce through that App Internet experience.”

Software entrants – “Five years from now you’ll see two or three players we’ve never heard of who will come on very fast.”

“There’s a lot of dynamism on this chart,” Colony said in an attempt to cover himself in case any of the vendors he mentioned were in attendance. “The future is not written. Any and all of these vendors can change these business models and move toward the App Internet.”

For technology professionals, the App Internet will mean change, according to Colony.

Application developers — are going to need to develop new programming skills.

Business process professionals — should not let any new application in to their organization that does not offer an App Internet experience. “Your workforces are all coming with these devices which are running the App Internet already.”

CIOs — will need to prove they can drive customer centricity by driving app intent.

Enterprise Architects – should not over commit to the cloud. “The cloud can still do some things for you but it’s not the final solution, the hammer that can hit every dam,” Colony said.

Infrastructure and developer pros -”You’re job is not going away. If you look at number of gigaflops in your company, they may not be in the data center, it maybe in hands of everybody.

We’re going to have to manage all those devices.”

Security and risk pros – “Your about to become very overemployed. There is risk in the App Internet. There are security problems. We’re moving executables through the network to employees.”

Sourcing and vendor management pros – “You’re going to have to make sense of all the new pricing and packaging schemes.”