Intel backs SaaS hoster OpSource in $20m round

Specialist on-demand hosting company OpSource announced a $20 million funding round this week, led by Intel Capital, the chipmaker's venture capital arm. OpSource provides hosting and service delivery management infrastructure to on-demand vendors and other ISVs who want to make their applications available as a service.

This is a great expression of confidence in the expanding market for SaaS provision. But I was curious why a company like Intel would want to invest in an on-demand provider, when you might think that it would be more in its interest to discourage a model that emphasizes economies of scale at the data center level. Surely that means it would end up selling fewer server components?

"They realize this is a changing market," Treb Ryan, OpSource's CEO, explained to me in an email. "More and more use of their products is going to be through these types of offerings.

"The underlying piece here is the transformation of SaaS," he added " — having an impact that goes beyond software companies and into more services." I thought that was an interesting comment, revealing an expectation that on-demand providers will increasingly move beyond providing simply applications into a broader set of semi-automated business services.