Anish Kapoor, CEO of SaaS web conferencing start-up YuuGuu posted asking whether SAAS has killed open source as a business model. His contention that in fact this is the case was articulated as follows;
Open source is always driven by… a central body that leads community development efforts to support developers and build revenue streams. In essence, that body gives away the base code and knowledge of the community version to encourage development of the service and expand distribution; to make the software go ‘viral’…
SAAS offers ready access to beautifully crafted applications and services through the browser for little or no initial cost. These applications supersede centrally-held open source projects since a. they are finished products (rather than base codes, which must be developed into end-user services) and b. can be easily found, used and shared by the end users of the application/service.
Also, the credit crunch has forced IT departments to look more intensely at costs. Therefore, any software that requires internal hosting, support and development (as open-source does) is less attractive than SAAS, particularly those with a ‘freemium’ model where the basic software is free with revenues accumulating for more advanced features and volumes. A ‘pay-as-you-go’ model works much better when budgets are tight.
So my thinking is that, the SAAS/’freemium’ delivery model is much more likely to gain traction and revenues than an open-source project, for an end-user service where a ‘common’ version of a piece of software is acceptable (for example online meetings). However where tailoring of a basic piece of software is more crucial to suit the needs and systems of a particular company, open source is still a viable route (for example integrated document management systems).
So to paraphrase – for “vanilla” type applications Anish believes that SaaS should be an easier sell than opensource where customers still need to think about non core details.
Anish’s post reminded me of a concept I came up with a couple of years ago that seeks to blend the best of both SaaS and opensource. Rather than seeing the struggle (if it indeed exists) as a zero sum game – how about trying to leverage the positive aspects of both types of software? Krish posted about open source business models awhile ago – here’s my take.
Opensource tends to build passionate users that consider themselves, to a certain extent “owners” and “developers” of the product in question. These communities tend to be rabidly loyal and have a tendency towards evangelisation. This is clearly a hugely powerful aspect of OSS and should be harnessed.
SaaS on the other hand tends to build networks or communities of individuals that share a commonality – be it use, interest whatever. SaaS users tend to be loyal to a point, but not nearly as loyal as opensource-ers.
To a certain extent SaaS enterprises have attempted to create the opensource level of community by embracing the concepts of beta-testing and user feedback and development. This however has been reasonably limited (mainly due to the fact that opensource is free, at some point a free beta-test of a SaaS product will generally swing over to a subscription based service).
Imagine if you will a situation where a revenue generating SaaS product builds a community of such committed users that they become the salesforce, an integral part of the development team and the PR gang. In reply to a challenge I came up with a few ideas around building this sort of community buy-in.
- There is no reason that SaaS users cannot feel the same sense of “ownership” as open sourcies. Many open source organisations are viable businesses, there is no reason why a linux business model could not be utilised for a SaaS offering
- Make your users feel special. If I subscribe to a SaaS CRM service, and obtain extra bang for my buck, some extra service that is complementary to the primary offering but distinct, I will feel inclined to champion that product
- Allow the users to shape the product. Go beyond beta testing and foster a culture of participatory development
- Open the floodgates – go public with the intention to build a free SaaS product with community led development and build in an alternative revenue stream other than subscriptions
- Find a niche that is so under-served by current offerings that just by creating a product (free or subscription) you attract passionate champions
- Adopt a persona of the underdog, appear to be a fighter battling the incumbents
- Find a vertical that is unserved by traditional software offerings – Facebook bought social networking to a bunch of non social networkers. TradeMe introduced internet auctions (and in many cases the internet itself) to a number of traders
- Aggregate the spend so that you per subscription amount can be as low as possible
Thoughts anyone?
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Great article, nice to hear other views on this subject and we thank you for taking the time to give your own thoughts.
Kind regards,
Neil
Neil Kay-Jones
Online Support & User Experience Manager
Yuuguu
Twitter: @NeilKayJones
Ben
an interesting perspective on a point that crept in at the end of a recent post of mine… http://cloudofdata.com/2009/01/is-open-source-inevitable-in-the-enterprise/
The post was considering the (inevitable?) rise of Open Source in the enterprise, but did postulate that SaaS might disrupt the whole thing…
I agree with the general point, and we are just about to launch our SaaS customer portal that adopts all of the points you articulate so clearly.
To say it has killed OSS is overstating – there are some places where installed software makes most sense and SaaS will never touch that (OS, browser, mobile offline)
Though I thought it worth looking at the logic from the point of view of customers…
The key point in any software choice is the difference in Total Cost of Ownership and risk regardless of how they are developed and delivered.
Any company delivering software or services incurs costs and risks that have to be charged somewhere – whether it is in the form of charging for premium services, charged support or simply charging for service provision at a cost that is attractive when compared to alternatives.
SaaS makes it possible to reduce the short term costs of adopting new technology, usually to around the same or less than the cost of adopting the OpenSource alternative, where investments need to be made in technology and skills.
The risk profile of SaaS is different to alternatives in that the costs of making a wrong decision are low, trying before making a large investment is easier, and the obligations for maintaining continued support sit clearly with the vendor.
This all adds up to it being the wisest choice for most business operations when adopting new technology. This same logic probably applies for switching technologies – just that the maths, justification, and politics get harder.
The biggest principle for me is about business focus – robust organizations should stick solely to core business – if maintaining tech is not your business, switch to a SaaS provider who specialises in doing just that thing.
I want to suggest you try http://www.showdocument.com – its an alternative tool for yuugu that allows document sharing and web meeting in real-time. all the participants in the session see each others’ drawing, highlights, etc. It is free and requires no installation.
josh
I have been searching high and low for articles on how Saas Is killing of the small developer.
Why is nobody talking about it.
Ofcourse Saas has killed OSS.
All open source applications like Drupal, Magento, etc are offering their own SaaS solutions.
I am also looking if any really “noticed” or agree that magento and Drupal especially(with launch of Magento GO and Drupal gardens.) Have “screwed” their own community.
The same community that helped build them today they launch their own hosted solutions where the small to medium business can launch their Ecommerce store or CMS based website without the need of any developer or a Web development company.
You should visit the Magento Go website which has the customer testimonials where one customer claims to have started her online store in minutes from the backseat of her car.
(i am pretty sure no one from Magento community who have been supporting and testing this application was in the backseat with her).
So why is no one noticing this, or am I missing something.
We already had clients complaining if wordpress of Joomla is “free” then why are you charging us so much(which is peanuts basically).
Now Magento goes and launches a hosted platform that cost cheaper than a ONLY hosting package that would be required to host a Magento or any other ecommerce website.(Magento also comes with a 1 million stimulus plan that makes the base plan free for 1 year. It can host 100 products.).
I think its a knife in the back for all developers who supported Magento.
Also Many marketing Consulting firms can do the job of deploying the eCommerce for their clients without the need to hire a developer or a development company
Its just killed the developer community.
Bigger Enterprises who hire a webmaster can also deploy their ecommerce and shopping cart without hiring an external company or hiring a team of inhouse developers.
Maybe I am not using the right keywords to search in google, But I just dont hear anyone speaking about the impact of SaaS and especially OSS Organization that have deployed their own SaaS platforms.(and how its screwing the developer community and killing off the market)