What Is Happening?  In the course of Saugatuck’s annual open source vendor outreach (please see Note 1), we have been exploring issues around the intersection – indeed, the integration - of open source software and Software as a Service (SaaS). Open source vendors have been forthcoming about how they see the roles of open source software within SaaS, as part of their own business models, and as part of the future of the software business in general.  Thus far, we have identified three key vendor attitudes and insights regarding open source and SaaS:

• Open source is critical to the growth of both SaaS and cloud computing;

• Cloud computing is central to open source vendor development and growth; and

• SaaS providers are exposing themselves to significant licensing issues.

Why Is It Happening?  Saugatuck sees the development and growth of open source and SaaS for enterprise infrastructure and business software as inextricably intertwined. They feed off of each other’s strengths, but create weaknesses in each other as well. Future published research from Saugatuck, including our open source research study scheduled for September 2008, will examine these in more detail, with other key issues, and with Saugatuck’s insights and guidance for users and vendors.

Our current research supports the above vendor attitudes as follows:

Open source as critical to SaaS and cloud computing.  It is not a surprise to hear open source vendors suggest this, but many of their arguments are sound. We see most of the factors that attract user organizations to open source as being important for SaaS providers as well. These include acquisition and licensing costs that average 80 percent lower than many comparable commercial, proprietary offerings.  And many vendors of open source-based “stack” offerings, including the core LAMP stack (Linux, Apache, MySQL, Perl/PHP) utilize a GNU general public license (GPL)-based, “unlimited” licensing scheme that applies to the enterprise, rather than to each server or user. This offers exceptional savings over the traditional licensing fees charged by other vendors of operating systems, web app servers, databases, and development tools.  Maintenance and support fees are often assessed based on the number of servers or users, but these also tend to be lower than similar fees for proprietary software. “A key role of open source in SaaS is to enable a combination of scalability at low cost, with interoperability and support that can match the best delivered by traditional software offerings,” states the VP of marketing for an open source database vendor.

Cloud computing and open source growth. Open source vendors, from established to startups, are benefiting from cloud-based compute, storage, and other IT services as their core infrastructure. The combination of pay-per-use IT infrastructure with open source-based software development reduces the software vendors’ IT capital investment requirements, their costs of software development, and their time to market.  “The cloud lowers barriers to entry even further than just building on community-built-and-tested software,” according to the executive director of a multi-national open source vendor association.  “We see vendors saving 50 percent to 80 percent in software development by building on open source projects, and saving similar amounts or more by utilizing Amazon EC2, EMC’s cloud, and other services. The only barrier to entry that remains is marketing.”

SaaS licensing exposures. “SaaS vendors may build on open source, but they also tend to ignore GPL issues, as most feel they are not developing or offering derivative works,” states the co-founder of an open source messaging and collaboration vendor. “What too many SaaS vendors don’t seem to understand is the extremely long tail of open source software,” adds the VP of marketing for an open source BI vendor. GPL terms state that vendors that alter open source code – i.e., use open source to develop “derivative works” - must make that code available to the relevant community.

But what many SaaS vendors do not realize is that the open source code incorporated into their offerings typically has a range of open source components within it, all subject to various licenses and compliance requirements.  “It’s not a problem now, but it is a future liability for many vendors, especially once we start seeing ‘license trolls’ in the marketplace, looking for potential violations,” explains the CTO of an open source-using SaaS provider. “If anybody starts trolling for license violations, a lot of companies will be in a lot of trouble – mostly for incorporating open source code into traditionally-licensed models,” adds the director of open source technologies for a leading server and hardware vendor.

“I can’t think of a single significant software offering that does not incorporate some open source code today,” states the head of open source strategy for a leading PC and server vendor. “And there’s no reason that won’t extend to software delivered and used as services.”

Market Impact   SaaS and open source are joined at the hip and will be for the foreseeable future.  Saugatuck expects that the future of commercial software will incorporate – indeed, be built upon – open source kernels and components developed in SaaS/cloud-based community environments that provide coding, testing, and QA.  These will include volunteer and commercial development entities. Some will be built around offering types, some built around industries/vertical markets; other will be built around specific vendors and offerings.

But the dynamics of commercial software development have already been changed by both SaaS and open source.  Acting in concert, these two forces will accelerate the already-emerging changes in the software industry.

Note 1:
Saugatuck’s Open Source Research Study

Saugatuck is in the midst of its third annual open source research study. Once annually, we supplement each of our continuous research practices with a wide-ranging briefing, interview and survey program.  We check milestones that have been established in previous research, update our scenarios and planning positions, and examine recent/ emerging trends and issues.

Currently, Saugatuck is working through an interview and briefing cycle that will include between 40 and 50 open source vendors, service providers, associations and foundations. This research will be complemented by a similar research cycle with user executives, to be conducted in August. The complete Saugatuck Open Source research study is scheduled for release in October 2008.

The author invites your comments and inquiries on this Research Alert.  Please contact Bruce Guptill at bruce.guptill@saugatech.com.  For a PDF Version of this Research Alert please Click Here (Site Registration Required).

Browse Related Research:

• Open Source

• IT Management

• IT Platforms / Infrastructure

• Software-as-a-Service (SaaS)