I just read an article by Jeff Kaplan of Think Strategies called "SAAS Fault Lines". I think Jeff raises an issue that will resonate with all software product vendors - not just SaaS vendors. In all of the companies that I have worked for there is a tension between strategic product focus and customer-specific features. Whether hosted or not, software vendors constantly walk a product management tightrope between good, strategic, architecturally pure development; and tactical work with a high maintenance overhead which keeps the lights on.

I dont think we can set down hard and fast rules for SaaS vendors - each case will have to be taken on it's merit and there will be times when customisation will be preferred and where it will make good business sense.

I think the technical challenge for SaaS vendors is to build a multi-tenanted service platform where customisation/extension is a managed activity rather than an ad-hoc one. Many SaaS vendors already offer per-customer schemas and extension points as part of their service.

The key questions for me are:

Where one draws the line on customisation

Each customisation/extension should be considered using simple product management criteria like - will it cost more to develop/maintain that it will accrue? is there a possibility that the extension could be reused for other customers? etc.

WHO owns and supports the extension.

...or to be more precise - who pays?

Which technologies can assist SaaS vendors to be as agile and flexible as possible (without making them snap!)

My shortlist would include SOA, Spring and OSGI.

The capability to be flexible and extensible will be key differentiators for SaaS vendors going forward.