SaaS and Cloud Computing: Do they share business models?
Do SaaS and Cloud Computing share business models? This might sound like a foregone conclusion to some, but you never know what you discover if you compare. BTW, What are the SaaS business models?
1. “Free” Model: Provide the software use for free but some or all of the following will apply to the user.
A. Suffer through advertisements,
B. Surrender the privacy of whatever user does at the website of the service provider, and
C. Email and any identity information shared with the SaaS provider are “harvested” and will be sold to somebody to “spamk” the user thoroughly for their thoughtlessness.
Customer Segment: Mostly individuals, or in rare cases small businesses, who are willing to take the free service. Can be mostly new customers.
2. Subscription Model. Again, the user will have to pay in one or more ways described below.
A. A pay-for-use model. Either in time based or feature based.
B. Fixed monthly usage cost with unlimited usage, or tiered and restricted usage.
Customer Segment: Primarily businesses across the board (many services to individuals have moved down to the “free” model). Smaller businesses are willing to pay a monthly fee to utilize business processes hosted elsewhere. Larger businesses that pride in their “edge’ on specific areas may be willing to use hosted business processes for their “non-core” or “non-edgy” business processes. This model is disruptive to existing on-premise software.
3. “Gifted” Model: Not all end users pay for the service, and those who do, pay for everybody else (that is, at least for a majority of the costs).
This model is used when the businesses who pay for this service benefit from those others who do not pay. This model is mostly prevalent when the software provided as a service is to share business information/data among multiple businesses. Example: A large chip manufacturer sharing purchase orders and invoices with its (in bound) supply vendors.
Customer Segment: Supply Chain businesses – can be manufacturing, retail chain, or services.
Compare these business models to the business model for Cloud Computing Infrastructures.
In Cloud Computing, the only business model used so far has been Subscription Model. Can we expect to see either the “Free” model or “Gifted” model any time soon?
It would be fun to speculate what would those models would look like in real world. May be a free platform to host your applications, but those applications will have the “free” model attributes mentioned above such as advertisements. The Gifted model is a bit harder- how about a free auction platform where anybody can build branded companies for public auction that compete with established giants like eBay?Is there a case to be made here for some of these types of companies?
The bottomline is this: SaaS and Cloud Computing may share at least one major business model but Cloud Computing has enough room to grow to come up with businesses that parallel the other business models of SaaS. This assuming, Cloud Computing is really “computing and storage as a service.”