SaaS vendors, eat your own dogfood, or die

SaaS alone isn't enough, argues the CTO of a SaaS application builder that recently moved its servers to Amazon EC2. The more profound disruption is the shift to SaaS-on-SaaS.
Written by Phil Wainewright, Contributor

We may be approaching the end of the road for established SaaS vendors — like Salesforce.com, NetSuite, Concur, Taleo and RightNow — who build their own data center infrastructure instead of consuming infrastructure as a service. That's the message posed in a guest column on GigaOm titled How Not to End Up as an Anachronism.

The column is by Greg Olsen (pictured), founder and CTO of Coghead, a cloud-based development platform for creating Web-facing business applications, which moved its servers to Amazon's EC2 and S3 platforms a few weeks ago. So Olsen is preaching what he's practised. In his column, he wonders why other SaaS providers aren't eating their own dogfood in the same way:

"As ironic as it may be, we continue to see software applications deployed as a service but which fail to use any service-based infrastructure themselves. They are two basic reasons for this situation: Change of existing operational services is hard. So is changing people behavior."

But SaaS alone isn't enough, he goes on to argue. It's SaaS-on-SaaS that's truly disruptive:

"We are now at point where implementors of SaaS capabilities are being disrupted by newer SaaS capabilities. Services that are built largely from other services are a reality, and offer many clear advantages ...

"The move to SaaS applications built on SaaS is a much more profound shift than the move from on-premise applications to SaaS applications ... Instead of a small number of very large, vertically integrated vendors, we are seeing an explosion of smaller, more focused software services and vendors. The reasons for this transition are simple: It takes less capital and other resources to create, integrate, assemble and distribute useful software capabilities."

The gainers in this new world, he argues, are ISVs like Coghead (and indeed developers that build their applications on top of Coghead and similar platforms). He doesn't name the losers (the list at the top of this posting is my own [note to self: and some of them are clients]) but he makes it pretty clear who he has in mind:

"A new software service economy is rapidly unfolding and is causing disruption in the software industry. Ironically, some of the first victims of this new economy may be some pioneers of the software-as-a-service movement. Today, many established SaaS application providers are applying much more of their precious focus and capital to infrastructure issues than newer competitors that are aggressively utilizing service-based infrastructure ... the build-it-all-ourselves SaaS application vendor ... will ultimately end up as [an] anachronism."

In other words, SaaS vendors, eat your own dogfood — or die.

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