Has SAAS killed open source as a business model?

Author: Anish Kapoor, Chief Executive Officer

I’ve been musing on this question for some time now – particularly as, at Yuuguu, we have ourselves been examining open source as a potential route to expand development and distribution of our service.

And I am beginning to think that open source software as a model to achieve these things is losing its lustre .

Open source is always driven by some organisation – 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’.

However, I believe software as a service (SAAS) has undermined this model.

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).

As ever – feel free to comment and share your thoughts and ideas.

Bookmark and Share

Comments are closed.