Honolulu-based Phase 2 International says it is teaming up with IBM to offer the technology giant's noted Lotus software on an on-demand basis, a move that should trigger a spike in its customer base.

Phase 2 said the agreement figures to propel its growth, with it possibly doubling the number of employees from the current 23 by the end of the year.

"There's a lot of exciting stuff going on," said Kevin Doherty, Phase 2 chief executive officer. He said starting Wednesday, IBM's salesforce will start referring small- and medium-sized businesses wanting to subscribe to Lotus On-Demand to Phase 2.

Phase 2 concentrates on the software-as-a-service market, which is gaining in popularity as businesses try to escape the cost of buying, installing and updating software. Instead, companies like Phase 2 rent software to businesses, which pay Phase 2 a monthly fee and access the programs that reside on Phase 2 servers.

Phase 2 already offers Microsoft applications and sees the IBM agreement as accelerating its growth.

The IBM agreement "is a great opportunity for that company," said Bradley F. Shimmin, principal analyst for collaboration and conferencing for Current Analysis, a firm providing research on telecommunications, networking and business software markets.

"It's a pretty big market that they're going to be able to sell to."

Shimmin said the move with Phase 2 coincides with IBM rolling out its LotusLive Engage product, which is a software-as-a-service product targeting large corporations.

At the same time, IBM will debut its Lotus Connections product, which is an attempt to marry social networking and worker collaboration in the business environment. With it, people inside companies can set up profiles and join intra-company groups of people in different locations who have similar expertise or responsibilities.

"I think we're out front on this," Doherty said. "There's not many people who offer this type of service tailored for businesses."

Phase 2 will also be offering other products from the Lotus suite of enterprise software, such as the popular Lotus Notes e-mail application and Lotus Quickr for document management and collaboration.

Doherty said IBM approached Phase 2 about eight months ago as it pushed into the software-as-a-service market.

Doherty said IBM wanted to move into the software leasing model and was looking for a partner to handle smaller accounts.

Phase 2 expects to draw customers from its online marketing around the world, just as it does now.

Doherty said people are often surprised to learn the company is based in Hawai'i, and is frequently asked why it chose Honolulu.

"The answer is always the same — why not Hawai'i."