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Open source solutions vs. SaaS applications: Weigh the options

Open source solutions and Software as a Service applications are both viable options in the midmarket. But which is best suited for you depends on your need for customization, integration and value.

The application options available for the midmarket are many and varied. Two popular alternatives to the more traditional -- and often more costly -- route of on-premise applications are open source and Software as a Service (SaaS) solutions. Although both provide many benefits, including reduced capital costs and subscription-based pricing models, it's the differences between the two models that may dictate which is best suited for your organization.

Open source solutions are more widely used today, and the question is less about if to use them and more about how to use them. And although open source and SaaS are two different animals, many people would be surprised to learn how often SaaS offerings are actually open source applications at heart.

According to Yefim Natis, a vice president and distinguished analyst at Gartner Inc. in Stamford, Conn., companies like Inc., Google Inc. and Amazon Web Services all use open source. "Many SaaS providers use open source to lower their own costs," Natis said. "But the only way users would know this is even going on is because the lower costs are hopefully, but not always, passed down to the users."

Utilizing established code with the effort placed on enhancing it, not reinventing the wheel, Natis said, is a smart strategy for large enterprises employing a team of developers. But when and how can the midmarket take advantage of these same technologies? One way for some companies is to start with the on-demand version of an open source application with an eye toward bringing it in-house at a later date.

Understand the hidden costs of open source

Open source solutions and SaaS applications can reduce capital costs -- but what happens down the road, after the intial implementation? "It's been said a million times before," Natis said. "In the full life of a software solution, initial costs are always smaller compared to regular maintenance work, dealing with issues, correcting failures and pricing out support costs."

Many people believe that open source is free, with the option to upgrade up to a support edition if necessary. In some cases this is true, but according to Liz Herbert, a senior analyst at Forrester Research Inc. in Cambridge, Mass., it's important to weigh the burden these "free editions" can put on IT.

"[Forrester] research shows that the SaaS support costs are very minimal, some of them with zero support costs," Herbert said. "With open source, the people cost of support can be high because it can be very resource-intensive."

And although support comes with SaaS applications, "you are not in full control of your SaaS application," Natis said. "As far as downtimes and failures go, if there's a problem with the environment, you have to wait for someone else to fix it -- and time is money."

SaaS: Fewer resources, fewer options

If IT resources are already pretty tight, SaaS may be the way to go, according to Herbert. "Internet applications require the organization to log in, and for some companies there are no extra costs or burdens on IT," she said. In-house open source applications can often require more IT involvement and, without the proper skills, resources, administration and management, can be a sinking ship.

The communities surrounding open source applications provide enticing offers -- new features, updates, bug fixes and upgrades from a community of skilled developers and users. But the level of paid support from your provider can determine how much time your organization spends sifting through the community.

Unlike SaaS solutions, open source applications can require some additional legwork to stay on top of upgrades and enhancements. "The burden on IT is heavier at this point," Herbert said. "A lot of open source applications don't have that packaged support to do this for users."

Determine your customization needs

For some organizations, the ability to fully customize makes open source applications appealing. And if customization is what you want, SaaS may not be the best fit.

You are not in full control of your SaaS application. As far as downtimes and failures go, if there's a problem with the environment, you have to wait for someone else to fix it.

Yefim Natis, vice president and distinguished analyst, Gartner Inc.

According to Herbert, many SaaS options are commoditized -- meeting close to the basic needs of a company, regardless of industry, and stopping there. This may not be a problem in areas such as customer relationship management, human resources applications and employee management, which are already similar across multiple industries. But when a one-size-fits-all solution doesn't suit organizations with specialized needs, open source becomes a strong contender.

"SaaS is a multi-tenant model where everyone has access to the same solution, so that deep customization isn't possible," Herbert said. "But open source allows for total customization."

Customizing the application to fit the needs of the organization can be especially relevant when dealing with integration issues. SaaS is still limited in some areas of integration, Herbert said, such as with user directories, Active Directory, single sign-on, etc. Not so with open source. "The open source code brings flexibility into IT and a lot more can be done with it," she said.

Herbert pointed out that some open source solutions (such as those from SugarCRM Inc.) offer both an on-demand option and an on-premise option, whereas SaaS is SaaS no matter how you slice it.

"The beauty of having an open source provider with an on-demand option is that you can get the best of both worlds," she said. Organizations can start off with the on-demand option and then, long term as the use of the application matures, it can be brought in-house. "This flexibility is a nice alternative," Herbert said. "With SaaS there's really no where else to go."

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