Being a huge fan of both open source and software as a service, I am often frustrated by the level of tension and debate that occurs between these two communities, because the disputes are pure demagoguery. At their core, both delivery models are natural market responses to a very simple and disruptive economic force: the devaluation and commoditization of software over time.
The economics are simple. Once created, software is easily duplicated, and the software of the past becomes the building blocks of the software of the future. Thus, the commodity software of the past is rapidly devalued to zero. Open Source chooses to ride this force by separating out the free component through community ownership and development; it is a fundamentally socialist approach. SaaS absorbs this cost through vertical integration, and strives to create new value and differentiation by delivering a holistic product; it is a fundamentally capitalist approach. However, the economic goal of both delivery models is the same: more stuff for all of us at lower cost. My frustration arises from the fact that the communities do not seem to recognize that they have this single admirable end in mind, they only differ in their means.
While many open source developers would like to believe there is some ideological heroism in their efforts, the truth is that they are simply solving an economic problem for a very specific market segment, and having fun along the way. Nothing wrong with that! But, only companies with strong IT capability can participate in open source development and overcome the market transaction costs implied by this do-it-yourself assembly of a complete, high value system that supports their business. Companies that create value for their customers far outside of IT, are much better served by SaaS. No matter how you slice it: THERE IS NO VALUE IN THE SOFTWARE OF THE PAST COMPONENT. You only achieve value when you remix it with more current technology and services. It’s a mashup world—get with it!