"The idea of putting corporate information on the Internet was something that people thought was just not going to happen," said Parker Harris, one of Benioff's first employees and one of Salesforce's top developers. "The real question was: Would people trust it? It is a huge issue."

Salesforce gradually signed up customers, including major financial institutions like Merrill Lynch and insurer Aon, which conducted intensive reviews of its data centers. Having these references helped alleviate concerns about security.

"As people use it, we learn more about it. It evolves, it becomes more widely adopted," said Gartner's Mertz.

But about two years ago, some Salesforce customers were targeted by spammers seeking to obtain their system passwords. The company thwarted the attackers by alerting customers and adding new security measures. "It is getting more secure over time," Salesforce's Harris said.

Technology Innovations

Today, Salesforce counts among its 55,000 business customers Dell Inc, Sprint Nextel Corp, Starbucks Corp, Toyota Motor Corp and the US Army.

"The maturity of the SaaS model has come a long way," said Tom Hattier, an IT manager with General Electric Co. "More and more companies have embraced it. That's usually the way to really prove something."

GE, which has been using web-based software to a limited extent for several years, went live last October with a corporate-wide system hosted by privately held Aravo Solutions that manages GE's database of more than 500,000 suppliers.

The surge in popularity of cloud-based business software has been support by innovations in so-called Web 2.0 technology from companies including Google Inc.

Google sells business versions of the email, calendar spreadsheet and word processors it offers consumers, offering them extra collaboration and archiving functions.