Open Source vs. SaaS - Software as a Service

Dan Farber wrote a summary of opinions declaring that Open Source will not doom the traditional enterprise software business. Tim O'Reilly has an interesting post entitled "Open Source: Architecture or Goodwill". This got me thinking about software development models, delivery models, licensing models, and business models. They are four different things, but are often confused and used interchangeably. Open Source can be used to describe all four models, but can be used selectively. For example, you could have software that was developed by an open source project team, delivered on an OEM server, licensed per server, and paid for on a term basis. In a world where software can be delivered as a service does it matter how it was developed?

Development models are concerned with architecture, technology platforms, and how the development work will get done. You can use open source teams, offshore or out sourced teams, or internal development teams to get the work done.

Delivery models include shrink wrapped, OEM, down loadable binaries, open source code, or SaaS Software as a Service. The delivery model is only about how the software is delivered, and does not necessarily dictate the licensing model or business model. For example software could be developed internally by a software company, delivered as a hosted service, licensed for consumer use only, and paid for by advertisements.

Licensing models set the rules for how the software can be used and what rights the developer retains. Traditional software licenses were tied to a server, a PC, or a user, but all the IP remained the property of the software company. There were various models that tried to match the way the software would be used to the pricing. Open Source projects typically use a General Public License (GPL), a Creative Commons license or some variant. But the many variants have different rules about how the source code and derivative works can be used and redistributed. Some require that anything you develop from using the free source code must also be redistributed for free. The licensing model governs the use of the software, but not how it is paid for.

Business models include traditional perpetual up front license fees, term based payments, subscription based, ad supported, or the support and maintenance model. Software could be free to consumers but require payments for commercial use. Again, the business model or payment method is independent of the development, delivery, or licensing model.

The software business is very complex. The licensing and business models are morphing into strange combinations. Open Source is a broadly used term that can have very different meanings in the context of development, delivery, licensing, and business models. Make sure you know what you are agreeing to when you acquire the right to use software. I go back to my earlier question. In a world where software is delivered as a service does it matter how it was developed? Hmmm...a lawyer would say "Well, it depends".

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Comments

[Anshu Sharma]

Good post. Often times, people argue over the future of open source or SaaS without realizing that they may be discussing different aspects- business models, delivery etc. It would be good if everyone had their fundamentals clear.

[Dennis Howlett]

Hi Don - did you pick up on the full Sandhill piece? As an aside, us Irregulars are actively looking for Microsoft enterprise business apps bloggers who might want to throw their hat into the ring. Anyone you know might be up for this?

[Niel Robertson]

Don,

Thank you for breaking down the semantic open source soup one step further than I did in my SandHill rebuttal. It's very useful and I would totally agree that one has to be careful about stating if you're talking development, delivery, licensing, or models when using the word open source.

[Don Dodge]

Thanks for all your comments. I agree that semantics and definitions are important in this debate. The software business is much more complicated today with mashups of various models.

I did see the SandHill Group headline and didn't bother to read the story. It was pretty obvious from the headline where the story was going. It is easy to write a catchy headline and pull examples of the latest buzz and extrapolate that the world as we know it will end. Cool ideas take a long time to build up to a trend, and trends take an even longer time to shift the balance of power and flow of money.

Enterprise software is alive and well...and very profitable...even if it isn't sexy and in the headlines.

Yes, licensing and pricing models are changing. Open Source is gaining some traction. But the enterprise software companies are responding with new models of their own and variations of the new models.

BTW, what are the "Irregualrs" and where did the name come from?