Where SaaS Fits in the Race for Control of the Vertical Integration Market

by Ostatic Staff - Jan. 13, 2010

Companies that use software, hardware and Web services to deliver a fully-integrated computing experience to the user may be destined to win the arms race in the vertical integration market.

Today's guest editor, Rafael Laguna, CEO of Open-Xchange, shares his thoughts about why Software as a Servic (SaaS) is poised to become the strategic weapon in the battle for control of an exploding industry.

Open Data and the Cloud

By Rafael Laguna, CEO, Open-Xchange

Remember IBM's vertical integration play in the 1980's? Chips, computers, network controllers, an operating system, development environment, database, applications -- everything. You've seen what Apple can do with hardware, an operating system, applications, and Web services, a total package to make using computers a fully-integrated experience.

Vertical integration clearly helps deliver the best possible solution to customers.
The Internet made the network ubiquitous. It was followed by a wave of "real" SaaS applications (as opposed to ASP that provided an iron lung for the client-server model). In the Internet/SaaS age, vertical integration gets rid of the hardware and operating system components because nobody cares anymore. What hardware runs Google? What OS is behind Amazon? It doesn't matter. With the devices that we use we probably care about the design or the browser we use, but not so much about the OS.

Making the network, the client and server OS ubiquitous is the big achievement of the FOSS community. Without the proliferation of free and open source software there would be no cloud infrastructure or SaaS as we have it today. FOSS drives commoditisation of what should be a commodity, thus enabling the huge advances that we are currently seeing.

It's also worth noting that the battle-ground has expanded hugely with the merging of network and software. The previously separate software and communication/Web/Internet services markets are becoming one. AT&T gets competition from Google, 1&1 from Microsoft, Microsoft from Amazon, Nokia from Google -- well, actually, everybody from Google and then a year later or two from Microsoft, right?

Cloud/SaaS software becomes the strategic weapon in this war. With no network, hardware, or operating system to worry about, vertical integration can focus on the application stack. With the software and communications markets merging, the integration of a full suite of applications into a "Web desktop" will be the battle call of 2010.

FOSS developers are also moving up the stack. I strongly believe that real SaaS software also needs to be free and open source to drive the ubiquity up the stack, enabling the next step of development -- free and open data in the cloud.

We have seen a slew of strategic software acquisitions in this space and it is for this reason. The VMWare / Zimbra acquisition may be the next one, although it's a bit old-fashioned -- "ASP" with OS virtualization meets a fully integrated OS/messaging/groupware stack with an on-premises heritage -- but it is a good start.

I believe we'll see a lot more of these types of things happening. Oracle, Cisco, RedHat, Novell, SAP, Symantec, Amazon and many other companies will either see the writing on the wall, become niche, or be out.