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SaaS - The Right Business Model for Open Source?
Matching Genes and Some Inter-Dependencies Make a True Family: SaaS Providers and OSS Makers

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

- R. Buckminster Fuller

What does Software as a Service (SaaS) have to do with open source? Not much, you might think.

SaaS, as you probably know, is a delivery- and business-model for software that has been proving quite disruptive to the traditional software business - just as the Open Source model has been. The two combined may turn out to be even more so.

Internet Companies, Hosters, Telcos, Carriers, Service Data Centers and others, have been making money for more than a decade by providing services based on Open Source software. Unfortunately for the makers of such software - Linux, Apache, PHP, MySQL, Postfix, Sendmail – just to name a few - it didn’t help them to generate much revenues (sometimes, as with MySQL a lot of value, though).

How then could SaaS help OSS makers? Because the folks that provide SaaS and the OSS makers have the same genes.

Let me explain.

Today we talk about SaaS as a relatively new thing. It's not. And 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 Internet Service Providers for free, with ads or for a little fee. Dirt cheap in any case. This leads to tens of millions of websites and some 1.5 billion hosted email accounts. There are two reasons for that: the underlying software has been built to scale and to support multi-tenant environments from the ground up, and it's almost all Open Source Software.

Open Source Software that 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 from the main underlying OSS license, the GPL (2,3, Affero), basically prohibit 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 its OS X, or Hardware makers like Linksys, TomTom and Tivo.

About Rafael Laguna
Rafael Laguna is Chief Executive Officer of Open-Xchange Inc., of which he was co-founder and chairman of the board until he took over responsibility as CEO in January 2008. In 2001, Laguna initiated the technology partnership between Open-Xchange's development team and SUSE Linux - today a Novell business. The result of this partnership, SUSE Linux Openexchange Server, became the best selling Linux-based groupware solution. Most recently, Laguna was crucial to the extention of Open-Xchange's product portfolio and formed the partnership with the world’s largest web host by known servers, 1&1 Internet AG.

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A great article on the benefits of the combined technologies. There are many companies that are starting to realize these benefits. If you notice, companies like salesforce.com, are starting to have "open source strategies" and partner with vendors with this model.

For example, we use saleforce and integrate using a product called Jitterbit to do our integration work. Jitterbit is a stronger offering than what we saw in the commercial space, and due to its low pricepoint for the offering and services, our budget is safe.

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