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.

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This entry was posted on Thursday, January 8th, 2009 at 12:37 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Viewing 4 Comments

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    Wonder full writing skills you got mate.

    respect
    Josh Hamal
    ...,
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    Thanks for posting this.. I agree with your thoughts.. It will only gain traction and revenues than an open source project..
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    SaaS and FLOSS are not exclusive at all, and none is overalapping over the other. I'm not sure why SaaS would kill FLOSS, in fact I many FLOSS aimed at corporate use are offered as SaaS (ERP, CRM, many groupware, dimdim, etc.). The cloud approach will even strengthen this trend, and the fact that the sofware is free as in freedom makes it easier to integrate and reuse standard components (fencing around each and everyone software has been an innovation killer in this industry). So actually I see SaaS and cloud computing more successful with FLOSS.
    If your software is already free as in free beer and you own the trademark and you already get revenue from SaaS then open source won't hurt you! You may have upfront work to get it out, and may need to spend some resources on the community, but what's to be lost?
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    Anish

    Interesting question. No right or wrong answer (yet).

    I have been asking why $CRM (salesforce.com) has been hammered on Wall Street. SaaS should make more sense as you point out. But for me, that issue has almost zero relationship to the OSS model.

    Allow me to assume that you have read Young & Rohm's "Under the Radar" about business models?

    It has been a year or so since I last read it, but do not recall anything to suggest an "either or" (XOR) decision. I see nothing in my travels along the information superhighway to suggest that one must choose one model over the other. In fact one of my favorite apps, SugarCRM seems to offer both models.

    Yes, I understand that you (and most of the world) have limited resources. Therefore, YuuGuu may have to pick one over the other. However, I do not think you are asking the proper question (Is SaaS killing OSS?)

    The better question for you, is along the lines:

    What do our customers need to succeed?

    You will recall this being referenced as "find a need and fill it." You guys have done that. Or least made a great start at filling the need. And back to the 'money' issue, one of your competitors seems to have more money for advertising than "stars in the sky". I trust you know that "no one wins a price war!" Especially with your selling price point. {grin}

    As I suggested to NuSphere (years ago, during a spat with the MySQL folks), you might want to consider forking. But in your case: fork the company. Your opening remark (above) talks of "expand development and distribution" which in my world, are two very different silos with very different requirements.

    Conclusion: I do not believe Saas will (or could) kill open source.

    -ski
 
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