SuccessFactors gets largest-ever Web software deal

SAN FRANCISCO, April 18 (Reuters) - SuccessFactors said on Wednesday it has reached the largest-ever licensing deal for Web-delivered business software, underlining a growing threat to conventional packaged software sales.

Privately held SuccessFactors said 85,000 Wachovia Bank employees would initially use its peformance management software that helps employers manage their staff's objectives.

The deal with Wachovia Corp. WB.N, the fourth-largest U.S. bank holding company, is expected to top 100,000 licenses. This far surpasses the previously biggest deployment of Web-delivered software -- Salesforce.com Inc.'s (CRM.N) recent agreement to sell 25,000 licenses to Merrill Lynch MER.N.

Jason Corsello, an analyst at the Yankee Group, said these moves highlight the growing acceptance of Web-based software among big companies. He predicted this would push more large corporations to embrace the alternative to traditional packaged software installed on individual computers.

"It further shows the penetration and reality that the model is a very viable one," he said. "We will continue to see large companies embracing software as a service."

Companies such as SuccessFactors and Salesforce have taken advantage of demand for Web-based software, paid for by subscription, which for many businesses is easier to use and maintain than installed software. For one, vendors can update software over the Internet, without disrupting the end users.

At the same time, big software makers such as Microsoft Corp. (MSFT.O), Oracle Corp. (ORCL.O) and SAP AG (SAPG.DE) are pushing aggressively into the market as the acceptance grows.

According to technology research firm Gartner, Web-based software will grow to 25 percent of business software revenue in 2011 from 5 percent in 2005.

SuccessFactors said deployments of 5,000 to 20,000 users within indivudual companies have been typical and predicted the Wachovia deal would help attract further big customers.

"Now, this is happening in just about every industry and market," SuccessFactors Chief Executive Lars Dalgaard said in a statment. "We're estactic that we have more users per customer than any other software-as-a-service solution."

ThinkEquity analyst Nate Swanson said the deal may ease the security and privacy concerns of some bigger corporations and agreed it could help speed adoption of Web-delivered software.

"For anybody who thinks software as a service is just for small businesses, they are not paying attention to the accelerated adoption within the large enterprise market," he said. "This is the new model."