In an almost sneaky way both Microsoft and Google are offering their solutions to the existing providers as well. With Google – as they want to own all data – the software remains in their data centers. With Microsoft, you are forced to introduce the whole MS application and Server stack to provide, for example, hosted Exchange and Sharepoint services. Microsoft wants to own the application. At the end of the day, as both are also fierce competitors, they will own the customers of the service providers as they are losing their control points and thus price control, branding, customers, growth and profit margins.

Open Source based SaaS solutions come to the rescue. A lot of mature Open Source Applications are available these days. They have the right genes -- they fit the infrastructure and the core competencies of the service providers. There is a lot of choice and great technology to ease deployment (check Parallels’ APS application list at http://www.apsstandard.com/app/). These applications are on the next level of the technology stack, above simple email, server hosting and web hosting. They provide the application function that SMBs and others are willing to pay for.

To be able to quickly get to market and to provide the right service levels, the providers are much more inclined to strike a deal with the software makers. With Linux and Apache, MySQL and PHP the internal skills were sufficient to do all this internally, leading to the Exploitation model that I mentioned before.

With advanced Collaboration and Groupware, Social Sites, CRM, HCM etc. this changes -- application domain specific skills are required in addition to the technical skills. This gives software makers the opportunity to get down to business with the providers. Business models can scale with the number of users buying these services, thus giving Open Source application makers a scalable business model.

Matching genes and some inter-dependencies make a true family: SaaS Providers and OSS makers.