As people in US enter the long weekend of July 4th (independence day), we have something to ponder about the independence of SaaS users. Alistair Croll, writing on GigaOm, points us to the possibility of SaaS vendor lock-in as a result of network effects.
Once a SaaS provider hits a certain size, secondary business models
based on network and ecosystem effects can eclipse the initial
business. This makes the economics of running a SaaS provider a bit
strange: Too much focus on short-term revenues may undermine long-term
success, because free helps reach critical mass, where new models can
emerge. At the same time, network effects may make it hard to launch a
new SaaS offering, since early players can erect significant barriers
For SaaS customers, this portends a new kind of lock-in. SaaS
promised us freedom from the proprietary formats and costly, custom
deployment efforts of enterprise software, but network effects can
constrain subscriber choice and make it hard to leave. If you want
access to Salesforce’s ecosystem, you have to use Salesforce.
This is an interesting take worth pondering over this weekend. I thought I will throw in few questions on this topic and see if I can get some response.
- Are we getting trapped into a lock-in due to the network effects?
- The cost of switching in the case of SaaS is not as bad as the previous desktop world. Does it help us (users) avoid such lock-ins?
- In this era of Open APIs, how bad is the danger of lock-in?
- Can SaaS applications interoperability and open formats help us avoid such lock-ins?
- Can a single provider run away with desktop era Microsoft kind of monopoly, in this SaaS based world?
I think these are some of the questions we will face sooner than later as we embrace Cloud Computing more and more. It is time for us to think out loud about how we can ensure that we don’t get locked in to a single powerful vendor like the previous desktop era. It is important that we, as a community of evangelists and users, take a hard look on these possibilities and make sure that a single powerful company doesn’t grab the big chunk of the SaaS market. For example, there is always a threat of Google running away with a huge marketshare in the SaaS ecosystem. How can we ensure that Google doesn’t become the Microsoft of the SaaS era? I am thinking deeply about these issues and I am keen on hearing the thoughts of SaaS user community. Feel free to add your thoughts here in the comments section or share with me through the contact form.