And CIOs should note that although Salesforce.com, NetSuite CRM, and SugarCRM use the CRM label, their functionality focuses on the sales-force automation capabilities such as contact management and sales tracking, a subset of CRM functions. Other applications hosted in-house tend to do the heavy lifting of transaction management.

For many CIOs, that's a good thing.

For example, E-LOAN realized that its mortgage loan transaction management system was highly efficient, tracking all the details of each customer. But the roughly 150 mortgage loan officers needed a framework for providing proactive loan status updates to customers, recalls CIO Jay Shah. So Shah deployed Salesforce.com as the online lender's "communications system of record," using straightforward data feeds from the transaction system to Salesforce .com to keep all customer contact records updated. No programming was required in Salesforce.com, just configuration to pipe data updates from the loan transaction system to Salesforce.com.

Loan agents could now have a customer's current loan status available in the same application they used to get the customer's contact information and display their calendars. Also, E-LOAN could now create business rules within Salesforce.com to alert loan agents when deadlines were nearing. Even better for Shah, those rules could be written by business analysts so IT staff could work on other projects.

At emergency medicine management firm The Schumacher Group, Salesforce.com is also integrated with other software through data exchange. But in Schumacher's case, Salesforce.com is the primary source of data rather than a consumer of it, notes CIO Doug Menefee. Placement staff members use it to track physicians and other healthcare providers' contact information and availability, as well as information on candidates they're trying to recruit. The hiring and assignment data are then uploaded nightly to an SQL database that the company's Oracle PeopleSoft resource management software uses to validate contractors' licenses, insurance coverage and specialties.

As these two deployments show, integration is easiest if the SaaS application can do its job alone, then batch-update other systems with its results.

Calling All Core Apps
Although integration solely via API is easy, this approach limits the ability to integrate SaaS applications into broader enterprise processes. And as on-demand CRM applications do interact with core systems, the integration issue will be harder to avoid, notes Chris Barbin, CEO of the SaaS consultancy Appirio.

He sees CIOs now beginning to realize this: "A lot of existing Salesforce .com customers are looking to migrate off Siebel, Clarify and Vantive," Barbin says, turning from using Salesforce.com as a contact manager and sales reporting tool to using it as an extension of the core enterprise apps. "That's a big issue because now you have to integrate Salesforce.com into your financial system and your master customer data," he says.