At its user conference in San Francisco last month, Oracle fleshed out its Fusion applications strategy for a best-of-breed suite of business software products, including an announcement that all of the releases will be available via a software-as-a-service (SaaS) model.

The move by Oracle throws more weight behind the trend for on-demand, web-based services that have grown popular through pioneers such as Salesforce.com with its hosted CRM offering and Google’s online office suite.

The first three Oracle Fusion applications are due to start shipping in the first half of 2008. They are all salesforce automation (SFA) products and will be available as traditional on-premises software or as SaaS. The launch will be followed by the release of other enterprise applications from Oracle and its stable of acquisitions under the Fusion brand, also delivered with a choice of two models.

Speaking at OpenWorld, Oracle chief executive Larry Ellison said the Fusion range was being developed based on customer feedback, and one of their top priorities was availability in a SaaS model.

According to Gartner, SaaS is one of the new fulfilment models that will help to transform the IT market between now and 2012. Gartner said that while the shift towards SaaS offers firms quicker access to IT products, it will also put pressure on IT departments to adapt their current processes to support this new way of acquiring and delivering applications.

Industry experts agreed that the shift towards SaaS poses new challenges for IT departments.

Speaking at a customer and partner panel at the OpenWorld show, Sam Bose, chief executive of online procurement specialist Zogix, said, “SaaS creates a conflict between business and IT. The business will go ahead and implement an application and then the CIO finds out when it’s too late to change it.”

Capgemini’s UK chief technology officer, Carl Bate, said that in the same way IT managers have found themselves under pressure from individual consumer power over the products they implement and support, SaaS is bringing about a shift to individual vice presidents and department power.

“A firm will have its back-office platforms in place but individual departments are saying, ‘This doesn’t help us to do our jobs and we don’t want to wait two years for it to be upgraded’,” Bate explained. “Now we’re getting to a stage of individual departments asking the CFO to let them use NetSuite for a particular aspect of their job. Some employees are paying for the SaaS model out of their own pockets as it helps them in their work, but then they’re using the existing Siebel CRM app to enter their corporate numbers.”

Bate added that the growth of SaaS could precipitate a shift in on-demand pricing. “Within a couple of years time, we’ll see a tipping point where employees will prefer to see a SaaS version as they don’t need to open up an application. When this happens, some firms might decide they want to buy their SaaS applications outright rather than continue paying £50 a month,” he said.