September 27, 2007
Unreasonable men posted this excellent article on the OpenSource/SaaS concept. (Thanks for the flattery by the way!)
The central premise of the post is that through utilising an OpenSource component to SaaS development or delivery, companies will be able to reduce costs, provide added value, achieve better buy in/lock in and general better their offering to the market place. They considered the SaaS/OpenSource concept as a borader base to aggregate diverse offerings/strengths/abilities to produce a customer offering. They visually represented the concept thus;
The post is excellent and a perfect extension of the OpenSource/SaaS dialogue.
As a post script the following was posted;
“I thought about this more over lunch. If what I say above is true, the downside would be that the current prevailing SaaS model is wrong. The model above is more akin to software virtualisation in its delivery than the one big customised software platform… or am i wrong?”
My take on the question is thus; any startup needs to create a product that works within its fundamental paradigm. This paradigm is broader than a conceptual framework but includes such trivialities as funding, revenue streams, time to revenue, palatability to the market etc etc. As such it is my contention that the current SaaS model isn’t necessarily wrong, rather it is in context with the current paradigm. While SaaS has been called a paradigm shift enabler, it still has to work to a certain extent within the constraints of the existing paradigm.
The challenge (as with all dot com businesses) is to find some method to monetization. Thus far the overwhelming majority of startups do this through locking up some part of their IP. The OpenSource community is the exception but I contend that some fundamental factors would need to change before the OpenSource methodology could be adopted given that the revenue streams from OpenSource are just a little too unusual/undefined/unclear.
What the current SaaS model does however risk is becoming irrelevant. If for example a new situation could eventuate, where a singificant sector could, en masse, become proponents of the community developed methodology, if they could build something without any short term revenue expectation, if they could fund without the constraints of tight capital, then the current SaaS model would be flawed.
As this is clearly not the case, the SaaS businesses of today are doing what they need to do. One piece of advice I would give them however would be to continue to be nimble and to continually assess the state of their space and to be ready to change the model as, and when, required.