Recent news that electronics manufacturing giant Flextronics selected an On Demand solution for its 200,000 users, caught the attention of the technology industry. And not just the two ERP giants that lost the deal to a budding On Demand upstart. CIOs took notice too. And for them, the message was clear: On Demand or Software as a Service (SaaS) is not just for the little guys anymore.

In fact, a new study of 252 CIOs from Burton Research Group and Ziff Davis Enterprise Research found that 79% of companies currently use some On Demand applications and most have been doing so for years. And a related study from Gartner Research suggests that On Demand adoption will only grow higher as companies drive to grow business opportunities and contain costs during the current global economic slump. (See: The Impact of the Economic Slowdown on IT Demand .)

The reasons CIOs participating in the study cited for adopting and evaluating On Demand were no great surprise: On Demand requires no in-house maintenance, offers shorter time to rollout than conventional software, and delivers usability from just about anywhere.

What many readers may find surprising (and what many old-school installed software companies don’t want you to know) is that traditional fears of On Demand are largely unfounded. For example, the study found that, while nearly half of CIOs expected a greater security risk, only 18% actually experienced issues. In fact, a number of CIOs reported selecting On Demand solutions because they provided greater security and performance than they could achieve by installing and managing applications in house.

“We find that our critical data is actually safer in the hands of our [On Demand solution provider] than it might be on our premises,” said one CIO quoted in the article. “They clearly understand the security and integrity risks surrounding that application better than their typical customer does, and they’re equipped to manage access controls, backups, and so on with great efficiency.”

This sentiment echoes those of Pepsi CIO (as reported in a previous Supply Excellence post ) who, after a security audit of an On Demand solution provider, concluded “Our data is probably safer behind [the provider’s] firewall than behind our own.”

Other areas CIOs reported that their initial fears did not match with reality included the notion that SaaS solutions have higher long-term costs. They don’t. In fact, 95% of CIOs said total costs for On Demand solutions were either in line with or lower than predictions.

The study also busted the long-held myth that On Demand deployments were short-term, stop-gap investments. All told, 67% of the companies using an On Demand solution have been doing so for two or more years. And, three-quarters of those using On Demand plan to expand the use of their applications. In fact, only 1% of responding CIOs reported having tried and then abandoned their On Demand solution.

Upshot: many of the preconceived reservations about On Demand no longer hold true. As IT capital budgets continue to tighten in response to prolonged economic doldrums (and as enterprises grow tired of waiting for long-promised updates to their ERP soutions), On Demand adoption will accelerate further. In fact, some of the world’s largest companies are adopting On Demand solutions to drive rapid adoption and long-term process and performance improvements.

To determine if On Demand is right for your organization, download a complimentary On Demand Survival Guide here.