Open Source Is an Open Book for SaaS Providers

During the CRM market's well-documented move from on-premise-only offerings to the on-demand world of software-as-a-service (SaaS), not as much attention has been given to the role that open-source technology can have in this shift. One aspect in particular that may have been overlooked, according to a recently published report from Gartner, is the extent to which open-source technologies are used in the infrastuctures of SaaS offerings. The report -- "Open Source in SaaS, 2008" -- was written by Robert DeSisto, a Gartner vice president and a distinguished analyst specializing in applications strategies and government. "[The study is] more of an awakening of what is going on behind the scenes," DeSisto says. "The point is, no one ever asks what's going on behind the scenes with SaaS. The problem is, when people do it, they don't tend to worry about details -- so we're exposing [in this study] what's going on." DeSisto explains that several CRM vendors -- in particular Salesforce.com, RightNow Technologies, and SugarCRM -- all use open source in one form or another. Salesforce.com, he says, uses an open-source database on its laptop disconnected version, while RightNow and Sugar use an open-source infrastructure stack on the server side. While particular vendors may use open source differently, DeSisto says that infrastructure isn't becoming a competitive differentiator -- and that is a good sign. "[Vendors] are not looking to differentiate on infrastructure," he says. "[They] are looking to differentiate on other elements on what they're providing." DeSisto stresses that open source is not a negative -- leveraging open-source technology has its value propositions, which may explain why the Gartner report predicts that 90 percent of SaaS providers will utilize some form of open-source technology by 2010. DeSisto explains that leveraging an open-source framework can help vendors lower software development costs, which in turn could lower acquisition costs to end users -- but that's not a guarantee. The report acknowledges the posibility that "vendors may choose to improve profitability or increase R&D efforts with their savings." DeSisto also stresses that just because a SaaS vendor might opt for open source does not automatically improve its overall offerings. "If open source can enable [vendors] to not spend a lot of money they would have to pass on to users, themselves, whatever the case may be, then it is valuable," he posits. "But you can go open source and still have terrible practices or operating software so any advantage would be lost anyway. [Open-source technology] is not a magical secret sauce -- it's just one piece." So what benefits can end users gain by buying from vendors that use open-source technology? Lower costs might be one, but DeSisto points to another long-term benefit: user communities. These self-forming groups can sprout up around application and platform providers, especially those utilizing open-source practices, often to share best practices or even entire applications. According to DeSisto's research, by 2010 open-source applications will make up at least 30 percent of a platform-as-a-service (PaaS) provider's ecosystem of available applications built on its native platform. This statistic, however, is dependent upon the mass adoption of PaaS--and there is a chicken-or-egg kind of challenge that may impede this adoption. DeSisto explains that while some companies have the platform (such as Salesforce.com's Force.com) for this type of community, other companies (such as Microsoft and IBM) have the developers necessary to build out the application ecosystem. Having the combination of platform and developers is essential, he says. "The engine fuel is the [adoption of the] platform," he notes. "If the application platform has difficulty getting adopted, then I think we won't see as much open source in SaaS as we predicted."

Related articles: Open Source as a Driver for CRM Innovation The upside is a high level of flexibility. Open-Source Data Quality and Integration When it comes to profitability, high-quality data is CRM's most critical success factor. Money and Mobility Sweeten Sugar's Pot SugarCon '08: The open-source CRM provider gets a new batch of venture-cap cash, and announces a new mobile offering for BlackBerry and other smartphone users. SugarCRM's New Spoonful The open-source CRM provider's Version 5.0 focuses enhancements on the platform and architecture; the company also provides a roadmap for going public. Don't Call It Centric CRM Update your Outlook: The CRM software provider has changed its name to Concursive Corp., and its flagship CentricCRM product becomes Concourse Suite.
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