Wednesday, October 20, 2004

sofware as a service

disclaimer: I'm nor a business wise nor I pretend to be one, so the following thoughts may be just bogus or make you laugh. OK with me. But if you laugh, please spare a minute and enlighten me as well.

I regret I couldn’t attend Web 2.0 conference, as it turned out to be quite fruitful for ideas, both for business approaches and technical questions. I did listen to some of the talks given on the conference, thanks to ITconversations and The Web 2.0 weblog sites.

One of them was a Gillmor Gang from October 8, 2004 on which Kim Polese (CEO), presented her new company, SpikeSource. Their business model assumes building a "solid product offering" on top of open source components. For their launch, they're planning to offer a product stack that would include MySQL, Apache, PHP and JBoss. In the future, they would create new offering, driven by the customer's demands. And they have been developing a "deep computer science" code that would allow (as I understood) to build and maintain these product stacks in a (semi-)automatic fashion. They are going to earn money from the support, training and other service-type activities, contributing the code back to the open source community.

While the idea looks interesting and the talk is quite entertaining I wonder how good this approach would scale in terms of revenue. One of the nice things with software is it's "softness" - once you built a product it costs nothing to duplicate (and sell) any number of copies. With any service, costs to run it usually proportional to it's size. Plus, scaling it depends on people - which mean you need right stuff, with appropriate training, experience, etc, etc. So, basically, building a software product is (potentially) much more profitable than selling a service and it's much easier to sell.

The SpikeSource (again, IIUC) has two assumptions to address this issue. Firstly, in the brave new world that's coming software components (at least, at the infrastructure level) are a commodity and hence it's very hard to squeeze a revenue in this market niche. IOW, could you build and sell a web server? Probably only a very specialized one, because it hard to compete with Apache. Secondly, there would be a custom software in their offering, as an value-add for basic OSS components. So, the success would depend on whether they could add enough value to the commodities to attract customers.

P.S.: I had read a couple of months ago about a similar initiative to provide a solid OSS-based platform for enterprises on top of Debian but just can't find a link. Pity.

P.P.S: About a year ago, I was dreaming about starting a similar company here in my country (Ukraine) but not having had enough experience, money and courage I put it aside. So I'm a bit envious (again). ;-)

update: google search for "
Lightweight Business Models" turns up quite a few interesting links.
update: fascinating post from Jason Fried about "human scaling" and some intrigue details about the Basecamp product.


Anonymous Anonymous said...

Hi Max!

Just got the link to your post from Doc Searls IT Garage. The company your looking for I believe is Progeny, founded by Ian Murdoch (the "ian" in Debian, "Deb" is from is wife's name Debra) who founded Debian. They seem to have a cool offering (I have no affiliation with them).

Take care, Yves B. Desharnais (yves at megared dot net dot mx)

9:35 PM  

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