Open Source versus Hosted Services (Or What Comes Next)

After spending some time with my previous post about the growing platform layers of the web – its interesting to note that each layer could be categorized as one of two types:

1. Open Source
2. Hosted Service

Spending some time with the list, the big differences that determine those offered as a hosted service:

  • Require a specific skill set outside of traditional application development
  • Are constantly changing due to market forces or changing platform requirements
  • Have costs that decline significantly with massive scale

As an aside – I think the next few years will see a growing opportunity for Open Source deployment via the SaaS model.

Many companies leveraged the open source model during the mid-2000s simply as a customer acquisition channel – enterprise sales cycles were incredibly long – so why not give developers access to the code base for free – so you can upsell them on services and proprietary licenses far easier in the development process.

Today, in the consumer space, we have an increasing bias towards choosing services that solve a problem – rather than those that offer a feature set.  Transferring that same mentality to the enterprise, most companies just want to solve a problem – not get bogged down with features and implementation.  Offering the open-source code base as a hosted service is just then a different channel to enter and sell to the enterprise – delivering the service they want on demand.

Related Articles:

Published by


I work for True Ventures, an early-stage venture capital fund with offices in San Francisco and Palo Alto. We partner with promising entrepreneurs at the earliest stages in the technology market providing hands-on management support to guide our portfolio companies through the challenges of early growth.

  • I agree. Although, I am curious to see how the enterprise geeks and paranoids responsible for planning lifecycle and information security take to platforms dependent upon open source community contributor, Joe in South Africa, completing a critical patch / update. I've personally experienced resistance, but I am hopeful it can be overcome.