SaaS and Open Source?

In a recent Forbes interview Treb Ryan, CEO of OpSource, somewhat bashes open source: http://www.forbes.com/2010/06/14/google-yahoo-software-technology-cio-network-open-source.html

Ryan makes some good points about the benefits of a multi-tenent architecture, but I feel he’s leaving out some important details.

Did OpSource write their own operating system, servers, middleware, and databases? They would be foolish to.
Did OpSource go with expensive proprietary software for thoses pieces? Probably not, with their business model they’d want to stay away from those license fees – and the OpSource website is RedHat Linux and Apache HTTP.

If they are smart, OpSource will, like all the other SaaS companies, use open source at every opportunity they can. And somehow this is a fatal flaw for open source?

Ryan is just doing a little open source bashing because it’s the thing that scares him the most. If SaaS companies can built multi-tenent apps on an open source base, then so can open source developers. He knows this. He’s just enjoying OpSource’s window of opportunity. But he joins a list of chief executives that have banded together over the years to tell a most amusing story. Bill Gates kicks it off in 2001:

“We think of Linux as a competitor in the student and hobbyist market, but I really don’t think in the commercial market we’ll see it in any significant way.”

2001: He was saying that open source is ok for a hobby, just not for your operating system.
2003: A few years after that, as open source databases started to appear, we heard the CEOs of database companies telling us that open source is ok for your operating system, but not for your database.
2005: Then the executives of middleware companies told us that open source was fine for your operating system and databases, but not for your middleware.
2008: After that we heard application companies telling us that open source is great for your operating system, databases, and middleware, but you don’t to use an open source application.
2010: Now Ryan is telling us that open source is fine for everything including applications, just not multi-tenent applications.

These CEO’s have painted themselves into a very small corner over the years. Looks to me like Ryan is the lastest one holding the brush. The question is who, if anyone, can he pass the brush to when multi-tenent open source applications appear?

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Re: Is SaaS just throwaway software?

http://weblog.infoworld.com/realitycheck/archives/2008/05/is_saas_just_th.html

I’d like to rephrase Schwartz’s question: given the different allocation of, and overall reduction in, costs associated with migrating to and between SaaS solutions, are there any long-term implications for the SaaS providers?

I think Schwartz has an interesting point although it is presented in such a way that it is hard to agree with. Personally I disagree with the term ‘throwaway’ if only because you can’t throw away what you never had. With SaaS you never actually ‘have’ the software so how could you throw it away? A niggle on terminology I agree but there’s lots to niggle with here.

I think the point that he’s trying to make is that with less up-front cost and easier set-up it is easier for a customer to switch from one SaaS vendor to another compared with switching from one on-site license-fee based solution to another. The key here is ‘easier’ but still not necessarily ‘easy’. If its easier to switch then the threshold of pain/missed-opportunity that a customer needs to experience before they decide to switch is lower. Most of the other comments on this piece point out that the cost of the solution and the cost of switching solutions includes lots of other costs that might be significant in the decision making process.

I think Schwartz is missing something however: no-one switches solutions just for the sake of it. To be worth switching the cost of switching must be less than the pain caused by not switching. Most IT budgets are stretched thinly so only the biggest pain points get dealt with first. If my existing CRM solution is one of my biggest pain points I might switch to a SaaS alternative, open source alternative, or a different proprietary in-house solution. Once I have switched CRM systems I’m not going to switch again until the new system becomes one of my biggest pain points again. As long as the new CRM system stays off the pain-point radar it will remain as the incumbent – potentially ‘forever’.

SaaS, as with other subscription-based business models, encourages the providers to demonstrate their value-add on a recurring and frequent basis. If they can do this and keep pace with features available elsewhere there should be no reason for their customers to ever switch away.