SaaS and Open Source: Solutions?

By: Steve Robins

If it’s SaaS, is it a solution? Can a vendor offer an open source solution? Of course they can. A solution is the complete answer to a customer’s problem. If that answer happens to contain open source (OSS) or Software-As-A-Service (SaaS) then it’s still a solution.    

Let’s define what a solution is:

Definition: A solution encompasses whatever it takes to solve the customer’s problem from their perspective. Complete solutions address all aspects of the problem including people, processes, information, technology and services (see diagram).

complete-solution

A Complete solution incorporates people, process,
information, technology and services.

copyright 2009 

Solutions can include a combination of multiple vendors’ and partners’ products and services, proprietary and open source software, SaaS, solution frameworks, integration tools and services, strategic and technical services, solution training, solution-level support and more.

Just One Solution?

Math solutions tend to be precise – for a given problem, there’s usually just one correct answer or solution. But in software, as in business in general, the same problem may have multiple answers or solutions. So another company, technology or business model may be able to meet your customers’ needs as well, if not better than, your company’s solution. And problems don’t change as quickly as solutions.  Think of the “transportation problem” solved by railroads and later by airlines; think of the “news problem” solved first by newspapers, then by radio, TV and more recently the Internet.  So don’t be surprised if new solutions arise – such as those including SaaS and open source.

More than one solution to a problem: A solution centered around proprietary on-premise software might compete against one with open source and another built around SaaS. Or the same solution might include all three, as well as other components. The key requirement: the solution must solve the customer’s problem with whatever components are most appropriate.

Open Source, SaaS and proprietary on-premise software each bring unique advantages that may be more applicable in certain circumstances and solutions than others. But each can absolutely be a part of a solution.  Same problem – multiple solutions.

Advantage: Open Source/SaaS?  By their very nature, open source and SaaS companies may be more solution-oriented than proprietary software companies. Solution-focused companies have the most complete solution vision. SaaS offerings are often turnkey and frequently provide the required functionality right out of the box so they have to go further than on-premise software in many cases.  In fact, a SaaS solution includes not only software functionality but also data protection, service level guarantees and other technical requirements typically provided by an in-house IT department.  

In a similar way, many open source companies earn revenue and differentiate themselves on the basis of their complementary value-added products and services. These paid, value-added services and features integrate closely with the product to provide a more complete solution. So these companies may actually have a broader view of solving the customer’s problem than proprietary software companies.

Conclusion. A solution can just as easily include open source (OSS), SaaS or proprietary software. However, companies may find that OSS and SaaS are actually more solution-oriented than traditional proprietary software.

Additional resources:

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3 Comments

Filed under Solution Marketing, Solutions

3 responses to “SaaS and Open Source: Solutions?

  1. Interesting post, Steve. From my experience there is one additional characteristic of a solution that meets customer requirements that you haven’t mentioned: price. Open source components are usually available for free, or if you need support, at a cost substantially below proprietary alternatives. Solutions do not compete only on capabilities. They compete on cost-effectiveness – capabilities for the price. There’s a lower limit of features and functions that usually you can’t go below, but once you cross that threshold, cost-effectiveness, ROI, etc. is usually what decides who wins. It isn’t the solution focus of open source software companies that wins the day, it is the frequently superior ROI of open source software in combination with the rest of a solution that makes it compelling.

    • Steve Robins

      Rich,

      Excellent points Rich. I’m glad that you brought up ROI. A few weeks back, I wrote on the value (i.e. ROI) of support services. I was using support as an example to explain “value,” but value or ROI is always a critical component of solutions.

      A solution should include SIVA: a solid solution that meets customer needs, solution information used in a dialog to educate prospects, solid customer value and flexible access so that it can be purchased in the way that best meets customer needs (Dev and Schultz 2005).

      All too often, vendors think only of features, failing to realize that the customer needs an entire solution, not just a product – features that include and go beyond the product itself, solid value or ROI, convenient access to the solution etc.

      Looking at ROI/value math, you can quickly see why open source has a lower bar:
      VALUE = BENEFIT – COST

      Suppose that the customer needs to achieve a TOTAL cost savings (i.e., value or ROI) of $200k over the life of a project. If he uses a solution based on proprietary software and costing $500k, he would need to lower his operating expenses (i.e., see a benefit) by $700k to achieve a $200k value or ROI:
      V = B – C
      $200k = $700k – $500k

      Now if he pays just $100k* for a solution based on open source software, he would need to lower his operating expenses (i.e., see a benefit) by only $300k to achieve a $200k value or ROI:
      V = B – C
      $200k = $300k – $100k

      So with the lower cost of open source software, he can live with fewer product/solution features that result in a lower total benefit. Just like Rich said, the bar is lower and in this case, he can achieve a $300k benefit rather than a $700k benefit to get the same impact on the bottom line or total ROI/value. This is a great example of why vendors need to look beyond competitive pricing to also consider the value that the customer is achieving.

      Thanks Rich!

      * While open source software itself might be free or low cost, you still need services to implement that software. So the cost of open source is not zero. In this example, I assumed that services cost $100k, so the total cost of the solution based on open source was $100k.

  2. Pingback: The Solution Marketing Blog: One Year Later « THE Solution Marketing Blog

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