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May 30, 2007 | Comments: (0)
SaaS - Underhyped?
So, the big news today (well, not the really big news, which is, of course, that the Spanish media is reporting that Arsenal may trade Henry for Eto'o plus 17 million pounds - I'll take it!) is Jason Maynard's provocative research note that suggests that there aren't enough quality On Demand/SaaS offerings out there. We actually have the same problem here in open source land: great potential, but still in the early days of our growth.
He writes:
It's fascinating to me how closely this language mimics what we say about open source. I've noted before that SaaS and open source are true bosom buddies. I would expect to see more partnerships between the two worlds before long. (Interestingly, though perhaps not directly correlated, JasperSoft is one of the top applications on Salesforce.com's AppExchange....)
- We stand by our call that On Demand computing is actually an under-hyped transformation of the software industry. Business software customers have been shackled by the complexity, cost, and inflexibility of traditional on premise software. We believe that On Demand computing will grow to over $21 billion in revenue by 2011.
- The rise of software as a service is fundamentally changing the rules of software and ushering in a new era of asymmetric warfare that is poised to break the traditional rules of the game. We firmly believe that in the coming year some On Demand vendors will introduce advertising-based or at least partially subsidized software offerings.Â
- The premise to our valuation argument is that incumbent vendors like Microsoft will have a difficult time organically shifting their business model to On Demand computing. Since the On Demand model is so disruptive from a licensing, deployment, and DNA perspective it could attract outside entrants into the business software space. Cisco has already made a move for WebEx. Why couldn't an IBM or even an ADP extend their respective models?
At any rate, welcome to the wild west of disruption. No, Mike, I'm not suggesting that the end is nigh for proprietary software companies. Remember: I came from Novell, which has persisted at $1B despite seeing its glory years fade over a decade ago.
But I am suggesting that disruption is afoot, and only those who embrace it will dominate the next two decades of technology discussion.
Posted by Matt Asay on May 30, 2007 07:39 AM
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I think OSS and SaaS are actually mortal enemies of the future. SaaS threatens to disrupt both the integration consultants and hardware industries by commoditizing them. OSS threatens to disrupt the software industry by being free, while keeping consultants busy with something to hack on and integrate. If you combine the two, you're just an undifferentiated data center because OSS (free software) and SaaS (minimal labor) means all you have to sell is infrastructure.
The disruption is the end of the "gentlemen's agreement" between proprietary software vendors and integrators to share the customer's wallet. Integrators will go OSS, software to SaaS, each going for the whole pie. It will be interesting to see which model prevails.
Posted by: Close That Source at May 30, 2007 08:10 AMThe future battle between Integrators vs. Software Vendors, as suggested by "Close That Source", is very interesting and visionary.
As a peace maker - how about this scenario;
A company develops a robust, end to end, completely pain free, middleware integration technology - a virtual service delivery platform - that bridges the gap between the Service Providers who host the software applications and the ISVs who need to remain competitive and who need to satisfy the rapidly growing end user (individuals, SMBs & large Enterprises alike) demands for web based subscription model applications.
Such a service delivery platform would fufill the SaaS architectural needs of both the ISV and the service provider. So, in this scenario, the ISV, the Middleman(Middleware Provider) and the Service Provider all share the revenue via a pre-agreed formula. Revenue would ensue from open source apps with advertising clip-ons or from pay as you use subscription models or a combination of both.
Have I brokered a peace agreement here?
Incidentally, after a exhaustive three year long search I have finally uncovered a company offering this exact middleware technology - a virtual on demand server - that SaaS enables any application, without requiring access to code (zero piracy) while providing the ISV with the ability to upgrade and patch the app without taking the 10, 100 or 100 million concurrent users off line. This is not a commercial - a white paper of this wholly grail of SaaS is now available.
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