British Telecom is seeking to bridge the gap between its customers and 3rd party software / applications vendors by buying into the Software as a Service (SaaS) market.

Earlier this year BT signed up with NetSuite and Sugar CRM to resell their Customer Relationship Management (CRM) products. More recently BT signed up with Salesforce.com and acquired Ribbit, adding to its portfolio of offerings. But this is much more than a venture into the CRM market, BT are moving into the growing Software as a Service (SaaS) market.

Given the current financial constraints faced by most small to medium businesses, there are strong arguments in favour of going down a SaaS route as opposed to going down the route of full aquisition and  on-premises installation of software and applications. SaaS is easier, cheaper and simpler to get up and running.

But for BT the advantage lies in the consultancy services that they offer alongside the software offerings themselves. Regardless of the route businesses choose there will be some element of customisation and professional services with applications implementation. BT sees itself as the fixer or smoother in the mix, aiming to make the implementation as simple and pre-integrated as possible.

And it seems that they may be onto something here. Many customers are looking for a wide range of applications from as few suppliers as possible. Yet the mythical “total suite” does not exist. So BT becomes that single supplier offering its customers the opportunity to opt into offering that meet their needs as part of an integrated solution.

I think this has some potential for BT, enriching and diversifying the portfolio that it offers to its substantial customer base. Yet here’s the catch. Can the BT operation ever become fleet of foot enough to offer the kinds of emerging applications that some of the more flexible and adaptive SMEs are looking for? I seriously doubt it. They are providers of established software applications to traditional dyed in the wool business operations. Their SaaS foray focusses on CRM applications at presnet and in the future will probably expand to include HR applications (Sage etc). I don’t think they can ever become providers of a integrated blend of innovative and emerging social software applications. Still what’s interesting is that they are experimenting in new markets and for this they should be congratulated.