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Do SaaS and open source offer a solution to mid-market software challenges? Or should you look to incumbent vendors for new alternatives?
Date Published: September 23, 2008
Length: 2,104 words
Executive Summary
In recent years, Software as a Service (SaaS) and open source solutions have been emerging as potential solutions to the challenges posed by software licensing. While both have undeniable benefits, users should examine the pros and cons of each before taking the plunge. At the same time, it also pays to take a look at innovative new offerings from incumbent vendors such as Microsoft Corp.
Introduction
By almost any measure, managing software is a big and usually unappreciated job. You have to keep track of all of the software on your systems. You need to know how much of it is fully licensed and paid for (a key concern given the prospect of audits by vendors and/or the Business Software Alliance). You need to stay on top of potentially unpatched applications. And you have to keep an eye on the bottom line to make sure you're not over-licensing or buying software you don't need or won't use.
The surprising (or not-so-surprising) truth, however, is that IT staffs often choose to ignore the issue altogether. According to one recent national survey of IT managers and CIOs, 69 percent revealed that they were not sure if they were in compliance with software license agreements, and 67 percent noted that their firms hadn't taken steps to ensure compliance.
Maybe it's no surprise, then, that Software as a Service (SaaS) and open source solutions have been generating a lot of buzz as commercial software alternatives in the last few years. To some degree, the hype hasn't been unjustified-both offer the promise of a radically new approach to software procurement, licensing, and usage. Compared to traditional software, open source and SaaS can seem like flexible, comparatively inexpensive (or even free), and user-friendly alternatives.
Are SaaS and open source really the answer for today's mid-market software needs? To answer that question, you need to take a measured look at SaaS and open source-and take a fresh look at another another new licensing and usage offering from a familiar source.
The Case for SaaS and Open Source
No one can deny that SAAS and open source have plenty of benefits. Consider open source. For starters, plenty of observers cite the software's security advantages over its commercial competitors. It can be customized to fit a company's unique needs. And it's designated as free to use (at least in its most basic versions), which makes it appealing to companies that either have limited cash on hand or which are leery of getting locked into using a single, proprietary software vendor.
No wonder, then, that it continues to grow in popularity. The Open Source Census, a global project that collects data on enterprise usage of open source software, notes that it has identified 275,000+ open source installations on more than 2,000 machines. The packages range from the Linux OS, Mozilla's Firefox browser, and the IBM Lotus Symphony Office package to the Xerces XML parser, the GNU Wget content management system, and the MySQL relational database. One upshot: According to a 2008 Gartner research firm report, more than 90 percent of all enterprises will use open source in some form by 2012.
The allure of SaaS can be even more powerful. Its value proposition is straightforward: You pay a monthly fee to access a hosted Web-based software application. There's no need to pay for individual licenses or make large-scale hardware investments. The monthly fees are predictable, and the solutions are relatively quick to implement. And thanks to the growing use of virtualization, which enables users to run multiple OS's side-by-side on a single server, SaaS adoption is getting easier.
With all that in mind, it's no surprise that vendors such as SAP, McAfee, and Oracle are jumping into the SaaS business and that, according to Connecticut-based research firm Saugatuck Technology, between 15 to 20 percent of all independent software vendors have already begun SaaS-related projects-or expect to within the next year or two. Gartner estimates that 25 percent of all business software will be delivered via SaaS by 2011 (up from around 5 percent in 2005), and that 90 percent of e-commerce sites will use SaaS by 2013.
Four Reasons to Think Twice
Given the obvious benefits of open source and SaaS, is now the time to ditch the conventional software approach? Maybe not. As fast as both technologies are growing, both have quirks and drawbacks. Here are four points to consider:
1. Support and Security
While open source is often thought of as more secure than commercial software, that's not always the case. Traditional software vendors such as Microsoft typically send out alerts and distribute patches when they find vulnerabilities in their products. Most open source code also has no organized system for security issue notification and patch distribution. And then there's the issue of support; some packages such as IBM's Lotus Symphony Office suite offer online support, while others such as Apache's Open For Business don't.
2. Industry Maturity
One challenge for the open source market is the lack of widespread industry governance. By the same token, the SaaS industry is only now hitting the growth-pains stage; an April 2008 Forrester Research report noted that the market is "marked by an abundance of start-ups, acquisitions and even some early examples of companies having to shut their doors." This state of relative infancy also means that there's little interoperability between vendors and that integration issues are still emerging-IT staffs can find headaches awaiting them when they try to make SaaS work with some existing legacy systems.
3. Location, Location, Location
Another basic but easy-to-overlook factor concerns the off-site nature of the SaaS model. What happens if the vendor's server suddenly get hit with a denial of service attack, an unanticipated usage spike, or even a power outage? Users of Google's SaaS service suite-which includes Gmail, the Google Docs word processor/spreadsheet combination, and more-learned all about that in August 2008, when the company experienced a service outage that left some clients in the dark for 24 hours.
4. Total Cost of Ownership
Plenty of companies-particularly those driven by strict bottom-line management mindsets-have made the mistake of embracing software with attractively low initial price-points but significantly higher ongoing costs. Those hidden costs can be true budget-wreckers. Consider:
- The price (nothing) of a basic open source solution can be appealing. But is your company prepared to spend the time and cash it will take to customize it?
- If you're mulling over a SaaS option, do you have a firm sense of how much IT staff time it will take to convert to the new software and then manage it ?
- Will you be able to deal with a short-term jump in user support needs?
- Will you have the management buy-in to support you when problems and delays arise?
So is all of this to say that you should stay away from SaaS and open source? Not necessarily. They can work well in a variety of situations. For example, SaaS has proven itself unquestionably useful through such applications as the Salesforce.com and NetSuite CRM offerings as well as Drupal, a Web-based content management system.
The truth is, however, that those are essentially niche applications-akin to side dishes to the main course. At this point, SaaS and open source don't appear to be ready for use as primary infrastructure applications. Indeed, a 2007 Forrester Research survey of North American and European software IT decision-makers revealed that only 16 percent were already using SaaS applications. As for reasons why not to use SaaS, the other 84 percent cited everything from integration concerns to complicated pricing models, security worries, total cost of ownership, and the like.
OVS: An Alternative to the Alternatives
What other options are out there? Earlier this year, Microsoft unveiled the U.S. version of its Open Value Subscription (OVS) program, an offering that provides a comprehensive way for mid-market companies (with between five and 250 PCs) to manage software acquisition and licensing. The program is notable for several reasons. For starters, Microsoft has by far the most licensed set of desktop products on the planet. Given that many-if not most-companies are already using the products, the OVS program can be an efficient way to maximize an existing investment and bypass conversion and integration headaches. At the same time, OVS is not a new, untested venture by Microsoft. The program has already been in place on the European market for the better part of the last decade.
That long history is apparent when you examine OVS. Unlike many software subscription licensing programs and contracts-which have been criticized as being too complex and inflexible-OVS is quite simple. Instead of purchasing individual licenses for, say, copies of the Office suite, OVS allows a company to subscribe to Microsoft software. By doing so, all or part of the firm's users (the customer has the option to decide) will be covered under the single subscription-with no need to buy individual licenses. In a sense, it functions like an auto lease. You pay to use the software for a predefined period of time (three years). At the end of the term, you can continue the subscription, buy it out and own the licenses for the software, or end the subscription altogether.
Tangible Advantages
OVS offers some concrete advantages. For starters, there's the issue of cost. Microsoft allows subscribers to either pay for an OVS subscription all at once or in three annual installments, which can be a boon for firms dealing with cash-flow challenges. It can also take some of the sting and hassle out of the annual budgeting and forecasting process and allow IT departments to predict and control expenses. There's also built-in flexibility: If you opt for the installment program and discover that you need to add extra licenses in the middle of a year, you don't have to pay for the additions until the next annual installment is due. By the same token, if you initially purchased, say, 100 licenses and you need to downsize to 75 during the year, your next annual bill will reflect the decrease. What's more, if you already have existing Microsoft licenses, you can be eligible for significant discounts-up to 50 percent in some cases.
Perhaps just as importantly, OVS does away with the need to track individual software licenses because the entire subscription base is covered under the agreement. It also ensures that the company is uniformly outfitted with the same software-which can be a huge relief for IT staffers who have to shift gears from dealing with, for example, Vista OS issues on one machine and XP on others. It can also save significant time by eliminating the need for IT staffers to monitor if servers, desktops, and devices are properly licensed. As any IT manager knows all too well, manual administration is notorious for gobbling up time, money, and staff hours; any steps to minimize it will get rid of plenty of headaches and deliver ROI in the process.
There's another key advantage to OVS: Subscribers are also enrolled in Microsoft's Software Assurance maintenance and support program. Software Assurance offers a range of features, including technical training, end-user training, employee e-learning courses, desktop deployment planning services, home use rights, and more. All of those are worthwhile in their own right, but the most attractive aspect of the Software Assurance is that it provides subscribers with automatic software upgrades. In other words, no more need to test and deploy multiple versions of updates on employee PCs.
Conclusion
Microsoft OVS might not have the buzzworthy appeal of either SaaS or open source, but it does offer a range of benefits. It uses proven technology that's familiar to most mid-market IT staffs. It won't bog you down with conversion and integration problems. If you already use Microsoft products, it can allow you to leverage your existing investment, spread out payments over time, and simplify the budgeting process. Put it all together, and you have a formula for solid ROI.
For more information on OVS-and on software licensing and deployment in general-contact Productive Corporation:
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About Productive Corporation
Productive Corporation is a specialized software reseller that helps small and medium businesses across North America with software initiatives in security, storage, and infrastructure. We provide subject matter expertise, access to technical resources, and excellent customer service. We also strive to provide the most relevant resources for our customers.
About the Author
Chris Mikko is a Twin Cities-based writer and editor who specializes in technology topics.
