January 28, 2009
Google’s New Hybrid Model
I suggested in a previous blog that a new model of a ‘hybrid’ software company is emerging in which Software-as-a-Service (SaaS) and cloud computing vendors are offering downloadable appliances, or ‘applets’, which permit users to utilize their web-based solutions off-line or behind the firewall.
My friends at Salesforce.com and other SaaS zeolots in the industry said I was crazy. But, many SaaS other vendors told me they were already offering an appliance option to their customers.
This week Google endorsed my idea by announcing that it is offering a offline version of its Gmail service.
Some folks expected this functionality in 2007, when Google introduced Gears, its browser plug-in aimed at providing offline access to Web-hosted applications. In fact, Google has been offering an on-premise search appliance for a while.
I believe the Gmail announcement is another example of a growing array of offline enhancements being added to SaaS/cloud computing solutions that will become commonplace in the years to come.
SaaS and cloud computing purists might view this development as a bastardization of the on-demand service ideal. In my view, Google’s new option and other offerings like Microsoft Silverlight or Adobe Air are simply the latest advancements in technology aimed at addressing real customer needs and preferences. In fact, Zoho unveiled its own offline email solution in October.
I think these offline capabilities will make SaaS/cloud computing more convenient for users, and will eliminate one more customer objection to adopting on-demand, web-based services which will help to accelerate the growth of the market.
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Hi Jeff,
I think this issue is divisive, because people become technology zealots, instead of thinking in business and economic terms. Instead of SaaS vs. software, the question is better posed from the product view as on-demand vs. packaged vs. customized, then the controversy falls away. For example, what is PC anti-virus software? It is on-demand, even though it has a client install and a heavy services component (data/threat research).
Taken this way…going from on-demand e-mail to packaged e-mail is not such a big leap, because there is no customization. A little more complex managing upgrades, and a shift of infrastructure costs back to the customer, some training, but still a commodity product. Perhaps security or comfort would make such a move plausible.
The heart of the hybrid controversy is really commodity vs. customized. Then you really break the model and make it hard to manage both. Small SaaS vendors can fall for this and find that their business has fundamentally changed from software to consulting. For a small startup, I would recommend focus and a single business model.
But hey, GE is in 100 different kinds of businesses. Doesn’t mean you can’t be profitable. You just have to be true to the customer needs and keep them aligned with the business economics. Google is more like GE, and they are fighting Microsoft.
By Joel York
at Chaotic Flow
Joel York — January 28, 2009 @ 10:54 pm
[...] a hybrid approach where a vendor offers both SaaS and software versions of a product? Recently, Jeff Kaplan reported that Google will be offering Gmail as an installed service–flying in the face of the current conventional wisdom that SaaS players should stay true to [...]
The SaaS Hybrid Question - Demystifying Software Business Models | Chaotic Flow — February 3, 2009 @ 11:17 am