Thursday, May 15, 2008

Reputation, SaaS and Marketplaces ...

Open sourced standards provide a mechanism for portability and are hence a necessary part of any utility computing marketplace. A first step towards this portable world is Google's Open SDK, however to explore this theme more I'd like to take a look at Bungee Labs' service.

Bungee Labs provides a framework for its customers to develop and release applications into a computing "cloud" that is managed by Bungee Labs. It is provided as a service rather than as a product. The customer benefits by not having to worry about infrastructure and also from only paying for what they use. The customer's only concerns revolve around their data, the applications they've written and how locked-in to this environment they are. The latter is a fairly major issue to many potential consumers, who may be reluctant to use such services without choice in providers and second sourcing options.

Let's now hypothesize that Bungee Labs open sources their environment under GPLv3. Now rather than giving away their competitive advantage, this would instead be a bold yet risky move (all innovations are) to capture a much larger market.

As soon as they open source, then either it will be ignored or other providers could decide to offer this same service based upon this new would-be open sourced standard. We would now have the making of a marketplace with potential portability between providers, a much more attractive option to any potential consumer. Open source is also the fastest way to create an emerging standard by enabling adoption by others.

An important but not to be forgotten side effect of this is that it also allows businesses to become familiar with the service running on their own machines, until such time as they are comfortable to shift into the cloud or, in this case, into the market.

By using an open source approach, a company would hope to gain a small piece of a larger pie based upon the open sourced standard which it has expertise in. If the approach succeeds then the company would in effect trade ownership of a closed locked-in environment for influence in a much bigger marketplace.

Q. How can you influence a marketplace based upon open source?
Q. How do you stop someone branching off in a marketplace based upon an open sourced standard?

With GPLv3 code you can't stop them doing this. However licensing is the wrong way to attempt to control such a market; it's a hangover from too much product focus. What you need to use are the two powerful mechanisms of reputation and trademarks. By establishing a trademark and offering trademarked images to all service providers who comply with the GPLv3 version of the open sourced standard through a testing or compatibility service (e.g. remote testing of compliance to a basic set of primitives which define the service) then in one swift move a company could:-
  1. Ensure compliance information is given to the end user (trademark)
  2. Create a method of enforcing compliance (testing suite and enforcement of trademark)
  3. Create an emerging utility computing market based upon portability and open source.
  4. Establish themselves as a compliance authority (along with all the lucrative service and other revenue streams available)
  5. Encourage operational competition of providers in the market as opposed to functional differentiation (SaaS loophole)
The trademark needs to recognised and trusted, hence reputation is key to this. It is critical that trademarks are enforced.

This idea was essential to Zimki and the formation of competitive markets of providers in this space. An open source system which allows for maximum competition (through operational improvements which don't have to returned to the core because of the SaaS loophole) but ensures interoperability by provision of trademarked images (Zimki Compatible) for providers complying to a testing service.

By open sourcing a platform (such as BungeeLabs'), combining this with a channel program to encourage other competitors to setup and establishing a trademark system for reputable providers, you could start to not only create but influence a marketplace in the Software as a Service world. This marketplace would offer portability and choice for the consumer, a compelling argument against the predominantly locked-in world of SaaS today.

Once we start getting into the nitty gritty of portability in the SaaS world and providers start to overcome their product mentality of the past, then I expect that the establishment of such trademarks and compliance authorities will become a major battleground in the next few years. Being that authority in a world which is heading towards computer exchanges and brokerages is of significant value.
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