Applications Management Engineer Sr (NYC) Next Step Systems US-NY-New York Post A Job | Post A Resume

[ Thanks to Rafael Laguna for this article. ]

What does Software as a Service (SaaS) have to do with Open Source? Not much, you might think. Or maybe you've noticed that the FSF extended the spanking new GPL3 to the Affero Licence--to deal with SaaS providers? It does not help Open Source Software makers to make more money, so who cares? Well, OSS makers should care, as SaaS may finally give them a business model that may finally bring them some money.

Why does SaaS help? Because the folks that provide SaaS and the OSS makers have the same genes.

Genes? Today we talk about SaaS as a new thing. It's not. Not because it's the successor to Application Service Providing (ASP), but because Hosters, Telcos, Internet companies and others have been providing SaaS for at least 10 years. Who provides your private email account, the web site of your baseball team, your school, your company? You are most likely getting it from one of these Service Providers, for free with ads or for fee. Dirt cheap in any case. This lead to 10's of millions of Web sites and some 1.5bn hosted email accounts. Two reasons for that: The underlying software has been built to scale and to support multi-tenant environments from the ground up. And because it's Open Source Software.

Open Source Software is free as in freedom and free as in free beer. This limits commercial exploitation of the software. So far the main business model for OSS makers was selling maintenance, services and certifications with it. Only a few really make money with this business model; Red Hat and Novell, maybe.

These limitations are from the main underlying OSS license, the GPL (2,3, Affero) basically prohibits commercial exploitation by the traditional means for the maker of the software, selling licenses. But OSS does not prevent you from coming up with cool services that everybody wants and to make money from it if you build them with OSS. OSS allows for gigantic infrastructures that were unheard of before--or for very low prices for devices. Famous Open Source exploiters are Google, Yahoo, all Hosters like 1&1, GoDaddy, Network Solutions. But also Apple with it's OS X, or Hardware makers like Linksys, TomTom, Tivo.

They grab what they can get from the OSS community, tweak it (because they can), add stuff to it and wrap it into a business model that works for them. Like Google's AdSense, or selling devices with services attached, like Tivo, Apple, TomTom. Most of these companies make money and have an edge by using OSS. Unfortunately the makers of the OSS pieces probably don't get a penny. Try "Settings->General->About->Legal" on your iPhone. Life just isn't fair.

Here comes the plot: Why not combine the traditional OSS business model with this Exploitation model to turn it into something that also makes money for the OSS maker? Make the Expoiters into customers--let's call them Service Providers from here on.

All these Service Providers are used to using OSS. Their data centers are full of it. Their people love it, live it. OSS is in their genes. This is why Microsoft has such a hard time winning this market. A Windows stack for hosted Exchange is like Outlook on an iPhone--eek.

This gives OSS application makers an edge over the proprietary vendors if they build their apps for high scalability and multi-tenancy. These apps naturally have an OS stack as a prerequisite, LAMP, LAMJ, LAMR, LAMPy, or what have you. This fits nicely into the infrastructures of the Service Providers, giving them the additional services to add to their product mix.

The one thing the OSS maker has to watch is the business model that he uses. It needs to scale with the business of the Service Provider or he will never make money. Revenue share with an upfront fee to cover setup-costs will do, for both the OSS maker and the Service Provider.

Matching genes and some inter-dependencies make a true family: SaaS Providers and OSS makers.

Rafael Laguna is the president and CEO of Open-Xchange Inc.

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Related Stories:
Early Reaction to Microsoft's Openness Pledge(Feb 21, 2008)
SugarCRM: Doubling Revenues Through Software as a Service?(Feb 12, 2008)
Gartner Predicts 80% of All Commercial Software will Embed Open Source by 2012(Feb 04, 2008)
Open Enterprise Interview: Fabrizio Capobianco(Jan 23, 2008)

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