While software delivered over the Internet has been hyped in recent months as an alternative to its packaged counterparts, there remain hurdles ahead as companies jump from the old model to the new one.

That was the impression coming out of the SaaS Summit in California’s NapaValley on Thursday. The conference is one of the first to focus on the software as a service (SaaS) delivery model, which has been glorified by the likes of Salesforce.com and NetSuite during the last few years.

Some 200 attendees showed up to learn how to switch over to the software “on demand” model.

Internet-delivered software has been used by consumers for a few years. But online software for businesses is still growing in popularity as customers learn the benefits of the new model, including on-demand delivery, low up-front cost, and faster and easier upgrades.

However, a big issue faced by customers is how to integrate their older packaged software systems with the new ones. That is the biggest pain point for James Woolwine, CIO of San Francisco-based Majestic Insurance.

Although Mr. Woolwine is open to adopting newer technologies such as on-demand software, he wants to feel confident about the return on investment, security, and trust before he takes a step forward. “The problem with SaaS is that it’s new and vendors don’t have a track record. So it’s a trust issue,” Mr. Woolwine said.

Treb Ryan, CEO of Opsource, who was in a debate session with Mr. Woolwine, said the SaaS industry is still maturing.

“SaaS applications are maturing and their ability to integrate applications is going to be critical. We’re seeing it with more and more applications,” Mr. Ryan said. Opsource, which hosted the conference, is a provider of services and tools that help software companies move over to the online model.

Vassil Mladjov, chief executive of corporate blogging provider Blogtronix, echoed Mr. Ryan’s point in saying that we are only scratching the surface of SaaS. “This is a steep process, and it is not happening overnight,” said Mr. Mladjov. He compared it to how companies slowly started adopting outsourcing methods.

SaaS Has Arrived

That said, the conference showed that SaaS has indeed arrived, with adoption growing steadily since Salesforce.com pioneered it in 1999.

Among the 200 attendees, about 40 percent were exploring the option of moving over to software as a service and 35 percent had already started the process. “A year ago we would have seen less than 100 people at this conference,” said Blogtronix’s Mr. Mladjov.

VCs Welcome Pitches

Venture capitalists on a panel told vendors that there is funding available for new SaaS startups.

“The money is there and the interest is there for those of you who want to start in the SaaS space,” said Jason Green, general partner at Emergence Capital, a venture firm that invests solely in SaaS companies.

“We feel that there is such a fundamental shift in the opportunity that we decided to dedicate 100 percent to it,” Mr. Green said.

Ann Winblad, partner at Hummer Winblad Venture Partners, said there is plenty of room for software-as-a- service companies, provided they can offer something innovative. Hummer Winblad has invested in 14 new software companies in the past few months.

“A great SaaS application is a new opportunity,” Ms. Winblad said.