April 15, 2008

SaaS providers going open source to cut costs

End users won't get discounts warns Gartner

By Jon Brodkin

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Nine out of ten software-as-a-service providers will rely on open source software by 2010 to save money, but the cost savings likely won't be passed onto customers, Gartner says in a new research note.

SaaS providers are typically using open source operating systems, application servers and databases, Gartner analyst Robert Desisto writes. For example, Salesforce.com uses an open source database for a service in which customers access Salesforce data while disconnected from the Internet.

Based on interviews with SaaS providers, Gartner determined that 90% will have at least some open source components in their technology infrastructure stacks by 2010. In similar research issued last autumn, Gartner says at least 80% of commercial software will contain significant amounts of open source code by 2011.

"The name of the game with software-as-a-service providers is dialing down your software acquisition costs," Desisto says. "It's really economics-driven."

In addition to using open source software, SaaS providers have emulated open source developers in several ways, says Jeffrey Kaplan, who runs the consulting firm THINKstrategies. "Many SaaS companies have adopted the public beta, open API and peer support techniques pioneered in the open source community to test, enhance, expand and support their solutions," Kaplan says.

The savings SaaS providers obtain by using open source software can be passed on to customers, added to profits, or used in R&D. Users shouldn't expect to see any cost savings, though, Desisto writes. The savings are more likely to go toward the vendors' bottom lines or R&D.

From the user perspective, there isn't much to complain about: The move to open source will be mostly invisible to customer IT departments, Desisto says. But there are some tangential problems to look out for.

Vendors such as Salesforce and SugarCRM are launching services that let users develop and share extensions to vendor-offered applications, and create new applications for the user community.

At least 30% of such applications will be "open-source-like," Gartner says. But developers who build applications could do so for profit, and the result will be a hybrid between open- and closed-source code models.

Thus, user organisations have to be wary of using applications that might open them to patent infringement claims.

"IT organisations should take an active role in governing the use of open-source SaaS offerings, specifically to ensure that the company using the open-source SaaS offering is properly indemnified from any downstream patent infringement actions from the open-source elements that SaaS providers are using," Desisto writes.

Another issue to watch out for: Non-IT departments such as sales or operations using the Salesforce and SugarCRM platforms to build and deploy applications outside the view of IT governance. "The IT group thinks twice before bringing anything in," Desisto says. "When you get outside that group, the governance issues fall away."

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