IBM believes businesses will increasingly buy software as an online service from vendors such as Salesforce.com Inc. IBM doesn't plan to become a direct supplier of software-as-a-service--it stands by its vow not to become an application supplier--but it wants to enable others to do so through its WebSphere family of middleware.

While middleware sales to user companies remain a healthy business for IBM, software-as-a-service is poised for rapid growth and IBM wants to provide "the platform" for companies that supply software as an on-demand service, said Gerry Mooney, IBM's corporate strategy VP, in a keynote speech at the SD Forum software-as-a-service conference on Tuesday.

IBM's WebSphere Application Server, WebSphere Portal, and WebSphere Information Integrator are all pieces of a platform on which a hosted-application service could be built.

While many software-as-a-service vendors disappeared when the dot-com bubble burst in 2000-2001, some survived and are growing into strong companies. In addition to SalesForce.com, which raised $110 million in its initial public offering in June, there are NetSuite Inc., which offers a suite of financial, customer-relationship-management, and inventory applications; Employease Inc., which has on-demand human-resource-management applications; and six-year-old Intacct Corp., which provides a set of enterprise-resource-planning and CRM applications.

Mooney is the former head of IBM's venture organization that advises start-up companies about market opportunities. While IBM doesn't put money into start-ups itself, venture capital firms are investing in software-as-a-service companies. Mooney points to Emergence Capital Partners, a one-year-old, $125-million venture fund focused on online technology services, as evidence of strong interest in the software-as-a-service category.

Gordon Ritter, general partner in Emergence Capital, said at the SD Forum that the venture-capital firm sees online software as an area that other venture-capital firms have tended to overlook. Ritter was an early individual investor in Salesforce.com.

So far Emergence Capital has invested in HireRight Inc., a service that checks credentials and helps firms hire new employees through an online service, and Visage Mobile, which allows any name-brand company to offer its own mobile phone service.

"We want to see as much energy underneath software-as-a-service as possible," Mooney said in an interview at the conference. If many application service providers get started, some will eventually become application providers sitting atop IBM's middleware and expanding its use, he said. Many small and midsize businesses aren't WebSphere customers, but they could become indirect customers if they purchase online applications that are distributed by it, Mooney said.

In his keynote address, Mooney noted that individual applications are losing their momentum as the ERP market matures. "Point products aren't growing. You see consolidation and fights over market share," he said. The most prominent consolidation was Oracle's acquisition of application rival PeopleSoft in January.

Instead of competing on applications, Mooney said IBM would provide a platform for start-ups and independent software suppliers for building sets of applications that can be grouped together to form a business "solution." While some vendors might provide complete sets of hosted applications, Mooney said small vendors could partner to develop sets of hosted applications with low subscription prices.

An IBM middleware platform "will drive more coherent suites of services. Data will flow across different applications" without expensive data-integration projects within each business, Mooney told a group of about 250 developers and venture capitalists at the forum.