Today, software development has reached unprecedented heights, thanks to the reuse of existing innovative modules. Open source, SaaS, and apis all play a huge role in this process, allowing developers to focus on product innovation instead of reinventing the wheel every day. Investor Rodrigo Martinez recently wrote about his trend toward open source, SaaS, and apis.
Above is a comparison of current search trends for the three (from Google). Open source is more about indie developers working together. Its products have unique competitive advantages, such as lower risk, lower cost, more reliable product quality, better industry adaptability, and more transparent products. Open source has become a key part of almost every technology company’s infrastructure. As a result, many open source projects have become the winners in this market. As can be seen from the statistical chart below, venture capital investors have invested heavily in open source and have expanded in the past two years to explore new business models. But to this day, only a handful make money. As a result, few big businesses are built on open source compared with other business models.
SaaS is addressing these challenges of open source. SaaS and open source are mutually exclusive in many scenarios, but they are also relevant as much of the infrastructure is being saasized. For example, a company’S CTO could spend some engineering resources to build a search solution on top of Elasticsearch, or buy Algolia’s SaaS service to speed up the process. This is true of companies like Contentful, Keen. IO, and other API-First companies.
The benefits of SaaS to customers are obvious, they have clear usage indicators, product market positioning is more clear; Predictable income and easier money planning; Companies are leaner. These characteristics are certainly more attractive to startups and early stage investors.
The chart above is an analysis of the factors that are preventing users from maximizing their use of cloud services. Despite the interesting data that has been generated since 2012, the SaaS space is also full of challenges. SaaS is very lock-in, it’s hard to build something on top of SaaS providers, it’s going in the opposite direction of open innovation; Reliability and privacy issues of cloud services can also be barriers to customers migrating data and critical infrastructure to SaaS.
The advent of apis seems to solve these problems. An API, or application programming interface, is a set of predefined functions. In practice, while most apis are offered as SaaS, the two models are fundamentally different.
On the one hand, apis are building pre-defined software modules, and in contrast to SaaS, apis are essentially platforms that allow development on top of them. It has a “build” nature that integrates the advantages of open source and avoids the disadvantages of SaaS. API companies, on the other hand, focus on solving “small” problems, which are very specialized and technically difficult for other companies to crack. Customers are largely willing to trust API providers and use those apis to build their core infrastructure. Because they believe that “if these people only do these things, they will do them better and more professionally.”
Obviously, it’s too early to tell whether API will beat SaaS or be a natural evolution of it. But Rodrigo is optimistic that the next generation of software “builds” will come in the form of apis.
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