Recent market projections from both Gartner Inc. and International Data Corp (IDC) indicate it is all up from here in the CRM segment, or it is until at least midway through this decade.

Gartner predicts that the CRM segment of the software as a service market (SaaS) should hit about $3.8 billion this year, up from $3.2 billion in 2010. That total puts CRM in a lead position in the overall SaaS market, which the research firm said should generate about $12.1 billion in revenue overall. The market total represents a nearly 21% improvement from a year ago.

Further, Gartner said it anticipates the overall SaaS market to hit $21.3 billion in revenue in 2015.

The Gartner research shows that CRM is leading the SaaS pack because much of the earlier hesitation about moving customer systems off site and into the hands of a third-party provider has dwindled.

Worries about security and availability are giving way to a comfort level, in part because this market segment is no longer brand new, Gartner noted. It is also the result of the increasing competition in the CRM space where “megavendors’’ are now cloud advocates and are therefore giving the SaaS model even more legitimacy, Gartner added.

Meanwhile, IDC is forecasting the CRM applications market will top $18 billion this year, up from $16.5 billion in 2010. The IDC results include applications sales in both on-demand and on-premise markets and cover customer service, marketing, sales applications and contact center software.

IDC said it expects the CRM industry to remain a “vibrant market,’’ in part because customers are looking to CRM vendors to help them with social networking and social analytics.

Even the contact center market, which has experienced a “modest’’ decline last year, is expected to turn around and could report a 5% improvement in revenues for 2011.

As a jury is preparing today to decide whether SAP owes Oracle $1.7 billion for copyright infringement, word emerged that HP is on the verge of signing a megadeal with Salesforce.com. HP will replace 35,000 to 40,000 seats of Oracle Siebel with Salesforce.com, Trip Chowdhry, an analyst with Global Equities Research wrote in a note to clients, citing industry contacts. Salesforce.com is hoping to close the deal before its Dreamforce user conference the first week of December, and if it does, someone from HP will deliver a keynote address at the event.

Before we examine the shift in the tech world that this would represent, let’s consider the massive egos that are operating in this incestuous world.

• Mark Hurd resigns as CEO of HP over expense account irregularities and violations of HP’s standards of business conduct, even though it recognized he didn’t violate its sexual harassment policy.
• Oracle CEO Larry Ellison fires off a letter ripping the HP board for firing Hurd (his tennis buddy). Then hires him at Oracle. Oracle has an open slot for president, thanks to the departure of former president Charles Phillips who later takes the CEO gig at Infor.
• HP, in search of a new CEO, hires former SAP CEO Leo Apotheker. Predictably, Ellison rips HP again, this time for hiring someone who held the top job at SAP for less than a year.
• Lawsuits go back and forth over Hurd’s hiring and eventually Oracle, HP, Mark Hurd come to quick settlement.
• Meanwhile, Oracle’s lawsuit against SAP, which claims that SAP’s onetime subsidiary, TomorrowNow, stole its intellectual property, goes to trial. During the proceedings, Oracle attempts to subpoena Apotheker to force him to appear in court in San Francisco, but he can’t be found. The search turns into a game of “Where in the World is Leo Apotheker.”

If Chowdhry is right and this deal comes together then Apotheker may show up in San Francisco after all — on stage with Salesforce.com CEO Marc Benioff.

One can’t help but wonder just what a giddy Benioff would come up with as he stands on stage with one of his former boss’s biggest applications customers, now his own. Benioff already had a few jokes at OpenWorld in the wake of Ellison calling out Salesforce.com’s security model, scalability and more.

But aside from the high drama what does it all mean for the market?

It would obviously be a big win for Salesforce.com but the company doesn’t really need HP to validate that large enterprises will run its SaaS-based application. It’s got plenty of similar customers that it’s more than happy to talk about. It would be a major loss for Siebel, which is also losing a big customer in Microsoft as Microsoft deploys its own CRM system in house.

It would seem that CRM deployments increasingly are SaaS-based over on-premise. Even Oracle, by most accounts, is selling far more of its CRM On Demand product than Siebel.

So, how much of this possible move simply a matter of Apotheker being vindictive? How much is it indicative that people will not wait for the ultimate arrival of Fusion Applications and turning to alternatives?

We got a preview of SAP’s mobile plans last week when the company bought Sybase. We got a preview of its in-memory database plans every time Hasso Plattner made a public comment.

And, we got a preview of its Business ByDesign plans two years ago when SAP’s then-CEO Henning Kagermann said it needed to “adjust the pace” of the ByDesign rollout.

Today’s keynote adhered pretty strictly to the on-demand, in-memory and on-device message.

In fact, today SAP confirmed the Business ByDesign predictions when it said the next version of Business ByDesign will include a multi-tenancy option, real-time analytics, support for mobile devices, a better UI and a development environment for partners.

And while much of the coverage of the Business ByDesign news will likely focus on questions like whether SAP is keeping its promises and how it compares to competitors’ offerings, it’s worth mentioning that Business ByDesign does have CRM functions built in.

While SAP’s original foray into SaaS-based CRM seems to have largely disappeared (SAP is no longer actively selling it) Business ByDesign appears to be core to the new SaaS CRM strategy. During the keynote address today, Jim Hagemann Snabe said SAP is developing a collaborative CRM application tying together its Business ByDesign CRM functionality with StreamWork, its collaboration tool. The result is a Sales tool with activity monitoring, similar to what Salesforce.com is doing with Chatter.

But how does Business ByDesign’s CRM functionality look right now?

I spoke with Judson Eli Wickham, business systems analyst with Pinkberry and an early adopter of Business ByDesign at the conference. Pinkberry, a trendy Los Angeles-based frozen dessert maker that is rapidly expanding franchises, replace its local accounting agency with Business ByDesign and one Excel spreadsheet that served as its CRM system with Business ByDesign’s CRM tools in December. There are 10 full-time users on the system, including three full-time CRM users, a vice president of business development and two managers of business development, Wickham said.

So far, so good. The business development team is using the system mainly for end-to-end tracking of new licensees.

“Our executives are very interested in where we are in the process,” Wickham said.

Aside from some idiosyncrasies in the system, user training was pretty straightforward as well.

The company rolled out Business ByDesign in early December. Eventually the company would like to roll the system out to its 19 company-owned stores.

Yet SAP has a lot of catching up to do. The on-again, off-again pattern with SAP CRM OnDemand and Business ByDesign have not shown a great deal of commitment to the model.

Will a third time be the charm?

It left me with more questions than answers though.

In fact, Denis Pombriant over at Beagle Research may have asked the best question about VMforce.

One thing that remains cloudy (sorry) is whether a transformed Java application running on VMForce inherits the multi-tenancy that every other Salesforce cloud application has.  If not VMForce reduces Force.com to the status of a simple server.  This would be a big departure for Salesforce and something that was not alluded to in the presentation.  But it is a question that ought to be asked.

And I have a few questions of my own to ask.

First of all, now that developers can work in Java while leveraging the Force.com platform, why do they need Apex (Salesforce.com’s proprietary programming language)? Salesforce.com has always said that Apex is very “Java-like” but nothing is more Java-like than Java, no?

Salesforce.com told SearchCloudComupting’s Carl Brooks that Force.com users will continue to use Apex if they wish and that 80% of Force.com development was basically point and click anyway, so they didn’t expect much change. Salesforce.com also said that AppExchange will continue on and Apex Force.com apps will not suddenly be available in Java on VMforce.com.

But what’s holding AppExchange partners back from moving to VMforce? As it’s been laid out, it appears developers could use VMforce for test and development and then pull it back off the cloud and in house, giving them more choice. Additionally. Salesforce.com made a big deal about the integration between VMforce and Force.com, including a “publish to Force.com” button that was well received.  Seems like one less reason to use Apex.

Of course, the big questions are around licensing and there was no word on that. None is expected for a while either but it seems to be a pretty relevant topic.

For example, will people using the VMforce applications be charged a license or is there some sort of usage-based fee? Do you get a Force.com license with a VMforce license? According to Salesforce.com, developers will get access to the Force.com platform, including the database, workflow management, Chatter social collaboration platform, search and application performance analytics.  Does that mean companies will be able to swap out Force.com licenses for VMforce licenses?

And why no word on pricing? SearchCloudComputing’s Brooks makes a good point that VMware will want to make it fairly cheap to encourage as many users as possible. Salesforce.com on the other hand is going to want to turn this into a bigger revenue stream, particularly if it cuts into Force.com usage.

Finally, I wonder, how much of this is an effort by Salesforce.com to extend its footprint beyond the core CRM users in sales, service and marketing. The AppExchange applications were supposed to do that, but most of them still seem to focus on some sort of CRM extension.

Chatter, which I had some questions about when it was released, seems to be Salesforce.com’s latest effort in that area and the fact that they are opening up Chatter to Java developers seems a clear step in that direction.

If nothing else, it does offer an answer to a question we asked earlier on the Voices of CRM, What should Salesforce.com spend $500 million on? This was only $142 million, but it’s a start.

A quick examination of some of the CRM-focused blogs found many different perspectives.

Gartner analyst Michael Maoz, in a perhaps tenuous but certainly much appreciated analogy, compares the deal to The Last Waltz and wrote in an earlier post that it’s the beginning of the end for social media vendors:

 The point is that in social networking, a business needs to move beyond silos into fitting Social processes into an overall CRM strategy. There will be many approaches. Maybe SOA and WOA techniques will make best of breed a viable approach for some businesses. Yet, however it unfolds, the goal is to insure that process consistency is achieved.

Meanwhile, Dana Gardner concludes that the acquisition means lead generation is the new advertising:

 So think of Jigsaw as bringing cloud-based ETL from all of your web interactions that feed the leads that enter into your sales and customer resource data bases and interactions. I’m proud and happy to have been successfully experimenting with the knowledge-driven content onramps to the search and social media myself for five years. It’s strong, knowledge-based content that precisely attracts and informs the users that begets their participation that begets the data that gets cleansed that nurtures more information sharing that begets the CRM process that leads to a sales cherished by both parties.

 Denis Pombriant, on the other hand warns, don’t call a customer contact a lead. His takeaway was that B2B CRM’s days of ceding attention to social networks are now over:

 Nonetheless, one of the big annoyances that many prospective buyers have is being barraged by irrelevant offers.  If the combination of Jigsaw and Salesforce can produce better targeted offers, offers that make sense to the recipients, then the combination will have done its job.

 Pombriant does, however, question the purchase price.

Jeff Kaplan, on the contrary, still considers it a wise investment. He sees the deal as Saelsforce.com’s venture into Data as a Service (DaaS).

As I see it, Salesforce.com will easily generate a far greater return from this substantial investment in the following ways:

• A CRM system is only as good as the data which it houses. Making quality contact information more easily available will increase the value of Salesforce.com’s CRM system and increase customer satisfaction, loyalty, etc.
• Jigsaw’s data-as-a-service (DaaS) gives Salesforce.com a new revenue stream and gives it access to an estimated $3 billion cloud-based data services market. This enables Salesforce.com to further diversify its product portfolio.
• Adding Jigsaw’s DaaS to its portfolio also raises the bar to Salesforce.com’s competitors who will now have to tighten their relationship with third-party data sources or make similar acquisitions.

Salesforce .com is already gearing up a new layer of marketing efforts around this acquisition centered on a new tier of services which it will brand as the “Data Cloud”

My own take is twofold. As Kaplan notes when talking about the acquisition’s potential for the company to diversify its product portfolio, what struck me is the line in Salesforce.com’s press release that “Jigsaw’s data cloud platform also creates an enormous opportunity for developers and independent software vendors to deliver entirely new applications.” It seems Salesforce.com sees opportunity in layering new applications on top of Jigsaw and bolstering the AppExchange.

It’s also looking more toward acquisitions and partnerships than in years past. Salesforce.com’s acquisition history reveals something about their future plans and their upcoming partnership/deal/announcement with VMware (a platform as a service for Java developers as our friends at SearchCloudComputing hypothesize) demonstrates willingness and even an eagerness to extend beyond CRM.

Finally, Data as a Service (DaaS), the Data Cloud, Platform as a Service (PaaS), VMforce — can we agree on a nomenclature? Do we even need it?

One oddity from the presentation — it comes with a pre-built integration for Salesforce.com data.

Is SAP not even bothering to pretend it has its own on-demand CRM product anymore?

SAP has taken a great deal of criticism from both analysts and the tech press over Business ByDesign — its on-demand ERP suite. And most of it was well deserved. Yet, that criticism of SAP for its lack of vision or commitment to Software as a Service rarely mentioned that SAP had actually built an on-demand application years before it even mentioned Business ByDesign. That’s likely because most people didn’t know about it in the first place, or at least had forgotten about it.

Aside from an announcement at the initial roll out and an update or two, SAP hasn’t exactly been pushing it CRM OnDemand product on the marketplace.

And, judging from yesterday’s SaaS BI announcement, it doesn’t look like that’s going to change anytime soon. Genband Inc., a maker of networking gear, was the one customer highlighted in the briefing and it runs Oracle on the back end and Salesforce.com for CRM, along with Crystal Reports.

When SAP first launched CRM OnDemand, the assumption was that it did so to keep Salesforce.com from siphoning off its install base. Some customers were happy to leave SAP CRM license on the shelf and launch Salesforce.com rather than go through the pain of a SAP CRM implementation. Looking at Genband, it doesn’t look like that worked.

Maybe that’s because SAP launched CRM OnDemand in an isolated tenancy model versus multi-tenancy and couldn’t make it profitable — the same problem that plagued the first version of Business ByDesign. Maybe it wasn’t all that committed to SaaS CRM in the first place and the initial project sponsors have moved on from the company. There’s certainly been plenty of executive turnover at the company.

Whatever the reason, SAP CRM OnDemand has not lived up to its promise.

In contrast, Oracle seems quite committed to SaaS CRM, despite Larry Ellison’s well-publicized rants on cloud computing. According to Ray Wang, an analyst with the Altimeter Group, Oracle CRM OnDemand now accounts for 85% of its CRM sales.

More recently SAP has made a renewed commitment to SaaS. As part of its pledge, it did say it was re-architecting CRM OnDemand in the multi-tenant model. But we sure didn’t hear about that yesterday. It’s redesigned Business ByDesign and is preparing to roll it out again to the market. It’s hired John Wookey, Oracle’s former development chief, to revamp its on-demand arsenal and it now offers CRM, carbon management and e-sourcing applications on-demand.

But given its track record with CRM and Business ByDesign one has to wonder how it will all work out. Maybe BI will be different.

A couple of questions linger.

Chatter, which essentially adds a Collaboration Cloud to the Salesforce.com stack (in fact, by the second day of the conference, Benioff’s slides were referring to it as such, alongside the Chatter branding), is yet another sign that social networking or Enterprise 2.0 is making its way into enterprise applications.

Several times during the conference — amidst his many speaking opportunities — Benioff remarked “there’s nothing else out there like this.”

Not entirely true.

Its competitors in the CRM market are building out similar capabilities, such as NetSuite in partnering with InsideView and RightNow in acquiring HiveLive. SugarCRM added Sugar Feeds, tools to let team members know when they’ve added a new contact, lead or opportunity. Oracle’s Beehive has been out for more than a year. Then there are the Enterprise 2.0 vanguard like Jive and SocialText.

But, he’s right, there are differences.

There’s a difference between what NetSuite has done with InsideView, which acts more as a monitoring tool for outside social media and what Salesforce.com is doing with Chatter, which lets employees within the company talk with one antoher. And it’s different from Beehive and the Enterprise 2.0 collaboration platforms, which are separate applications, in that Chatter sits within the Salesforce.com application. Additionally, Chatter provides something I hadn’t seen before; updates from other applications, for example SAP automatically letting a sales rep know when an order has been filled.

So, rather than partnering with or acquiring an Enterprise 2.0 company, Salesforce.com elected to create its own collaboration platform and embed it within the Salesforce.com application. It’s an effort to ensure users live in Salesforce.com as much as possible.

The most popular of collaboration tools will not go down easily

Yet Salesforce.com still has to convince its customers to leave the most popular of all collaboration tools — Microsoft Outlook. In fact, the announcement that drew some of the biggest applause from the 18,000 assembled at Dreamforce was news that the company had updated Salesforce for Outlook 2, associating to leads or cases automatically, when users click “send to Salesforce” from Outlook.

And Microsoft is not standing still either. On Wednesday, it also announced social networking plans. The next version of Outlook, Outlook 2010, will allow users to view the email sender’s activity on Twitter and Facebook. The next version of Outlook, Outlook 2010, will allow users to view information from the person sending emails, showing their activity on Twitter and Facebook.

The other thing I have yet to see was any sort of filtering or semantic understanding. Chatter allows users to bring in results of searches on Twitter or Facebook and embed them in the Salesforce.com interface. At Dreamforce, Benioff demonstrated how an internal group at Salesforce.com, focused on competing with Microsoft SharePoint, could pull in all tweets regarding their competitor. Yet it offers no filtering, just a constant stream of information, be it useful or not.

Salesforce eyes the enterprise

Additionally, this is clearly an effort by Salesforce.com to extend itself into the wider enterprise. By offering a Chatter Edition for $50 per user per month, Salesforce.com hopes to reach employees outside of the traditional sales, service and marketing realms associated with CRM. Benioff said as much in a meeting with financial analysts, calling Chatter his “Trojan Horse strategy.”

Salesforce.com undertook a similar effort with Content, its content management system, seeking to pick up additional users — and subscription fees — from employees outside of sales, service and marketing. Apparently Chatter is now the vehicle Salesforce.com intends to use to spread its footprint. A Chatter Edition license includes a Force.com and Content license.

Time will tell if users in the back office are as excited about Salesforce.com as the sales teams, the early adopters of Salesforce.com, who loved the application and forced it on the rest of the organization. And if they’re willing to pay for it.