SaaS and Open Source Join Forces
April 25th, 2008
Open Source adoption
Was just looking over a Gartner report, which finds that by 2010, 90% of SaaS providers will utilize “some” open source software in their offerings. But it is said that this use of open source is primarily limited to the vendor’s infrastructure and is not expected to offer them a “competitive advantage”.
Disruptive Technology Changes Everything
My first reaction was…huh? I believe these vendors absolutely will experience competitive advantages from their use of OSS infrastructure. The variable cost subscription model should allow SaaS players to grow or constrict their consumption of OSS at the same rate as their own customer subscriptions. In addition, access to talent – Engineers who excel at their craft and aggressively adopt OSS tools – provides an advantage to the player who adopts this strategy. In fact, SaaS vendors may go far beyond their initial deployments of OSS for infrastructure, and drive even greater success by increased adoption of OSS along with effective use of customer/developer communities as part of their offerings.
A Note of Truth?
I say this, as the tentative nature of the report reminded me of recent headlines in music industry journals. Record labels and retailers are reeling from their failure to adapt to disruptive changes in their own distribution model:
- Apple’s iTunes online store just passed up Best Buy to become second largest music retailer in the country. They are about to launch a subscription based offering.
- Wal-Mart, the number one music retailer in the country, are reportedly demanding that the major record labels reduce wholesale prices so that the average title can sell for less than $10.
- This month Nine Inch Nails released a new album without a major record label, in packages ranging from a free download of nine tracks to a paid deluxe package for fans. The label that broke NIN filed for bankruptcy in February.
- Only fifty-two percent of teenagers bought a CD in 2007, down from sixty-two percent in 2006.
Quite a fact pattern! SaaS and open source software movements, which are very much compatible, have the ability to inflict this kind of disruptive effect on the perpetually licensed proprietary software market.
April 28th, 2008 at 7:51 am
This post is right on and very important. The relationship between OSS and SaaS is critical to understanding the way high-value software products are being delivered to the marketplace at accessible price points. Access to high quality information technology tools is a key factor in why all of us should be optimistic about the prospects for the industry and economic growth more generally. Morris Panner, CEO, OpenAir, Inc. (a SaaS company that uses OSS in its infrastructure)
April 29th, 2008 at 3:41 pm
Agree with the posting entirely Doug. I think you guys are way ahead of the curve, but I would be interested in hearing your thoughts on the big software guys. Seems more and more news indicates they’re adopting some of the same philosophies to take their software to the subscription model [and even some talk of community involvement?!]. Granted it takes a long time to turn a big ship & it’s hard to wean off those perpetual licenses, but how far behind are they?