There are different schools of thought when it comes to SaaS and Open source (or SaaS vs. Open source as some would put it). Some believe that only one of them will survive and win over the other, others believe that both will co-exist, while the third group believes they will merge.
It’s certainly interesting how they feed off each other’s strengths and also create weaknesses in each other. Many SaaS providers, for example, use open source software (OSS) for its lower costs thereby driving open source growth. Open source vendors, on the other hand benefit from cloud computing and using web infrastructure services on a pay-per-use basis.
Open source licensing can create issues for SaaS vendors if it is not fully understood or complied with. A number of SaaS vendors may be incorporating open source code into traditionally licensed models unknowingly and without being aware of the violation until challenged. There is also repeated criticism regarding the security of open source software, which SaaS vendors need to take into account.
From the cloud computing end, although it is improving by leaps and bounds, reliability is something which SaaS providers and open source vendors have to worry about. Amazon’s S3 online storage services suffered two notable outages this year, which disrupted websites using the infrastructure service.
Those who believe open source or SaaS will win out over the other – due to the community contributions and support for open source software, or because open source software licenses will become irrelevant in the networked world – are wrong, because both of them can and will co-exist. What’s going to become more successful in the future is a SaaS revenue generating product that uses open source and is able to build a community as loyal as OSS communities which act as its sales force and becomes part of the development and PR team as well.
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"Online communities, iterative methodologies and software scalability" with Andres Camacho - Vice President of Engineering at Vinfolio 
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