Building SaaS Business on Top of Open Source - Economic and Legal Considerations

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1 Building SaaS Business on Top of Open Source - Economic and Legal Considerations Ville Oksanen, Nina Helander, Marko Seppänen, Mikko Puhakka, Juha Laine Helsinki University of Technology - Tampere University of Technology

2 Who is Speaking? L.LM. Researcher at SoberIT Ossi-project Partner, Turre Legal

3 SoberIT Software Business and Engineering Institute..a Unit of the Department of Computer Science at Helsinki University of Technology software product business distributed product development usability digital economy & software licensing Currently building portfolio (courses, projects) on software service business ServOS-project

4 What SaaS is (aside hype)? Chong and Carraro (2006) Level I -Ad Hoc/ Custom Basically ASP-model, in which the service provider offers a single, non-customized application to a customer

5 What SaaS is? Level II -Configurable Like level I, but the application is configurable for each of the customers

6 What SaaS is? Level III -Configurable, Multi-Tenant-Efficient Like Level II but the application can handle many customers at once without the need for separate instances

7 What Saas is? Level IV - Scalable, Configurable, Multi-Tenant-Efficient A SaaS system is scalable to an the applications are hosted in a load-balanced farm of identical instances, with each customer's data kept separate, and with configurable metadata providing a unique user experience and feature set for each customer. A SaaS system is scalable to arbitrarily large number of customers, because the number of servers and instances on the back end can be increased or decreased as necessary to match demand, without requiring additional re-architecting of the application, and changes or fixes can be rolled out to thousands of tenants as easily as a single tenant.

8 SaaS - NG in-house, third-party, and outsourced applications all operating in a uniform environment, with on-demand provisioning of both in-house and outsourced hardware resources and also, of course, high degrees of security, monitoring, auditing, and management. (Foster and Tuecke 2006)

9 ..In other words There are no predefined services providers but instead the user selects dynamically the service provider, which matches best to the profile user has defined The roles of service user and provider are dynamic i.e. anyone can let others to use their free resources. The services are offered globally i.e. the user does not (necessary) know there the service provider is physically located. The service itself may be a product of several services, which are dynamically linked together

10 IPRs and Services IPRs don t generally speaking protect services as such However, certain aspects of services can be protected: Brand: trademark, design rights (utility patents) Tools & processes: patents, copyright (in case of software), trade secrets

11 In case of software Using software to offer services not relevant as such from the copyright perspective Not making a copy or making available However, it is still possible to have specific provisions how the software can be used in the software licenses For example, the number of users may be limited or the users have to be employees etc.

12 OSS and SaaS None of the widely used OSS-licenses contains special ASP/SaaS-related clauses Since software is not distributed, even strong copyleft licesens do not require publication of the changes Some developers (and Richard Stallman) consider this as ASP/SaaS-loohole

13 Strong copyleft..? Organization X Distribution of software Original work Some changes Derived work Requirement to publish the source code

14 Exceptions Affero General Public License Modified version of GPL v.2 Official support of Free Software Foundation Honest Public License Modified versions of GPL v.2 by Fabrizio Capobianco

15 * d) If the Program as you received it is intended to interact with users through a computer network and if, in the version you received, any user interacting with the Program was given the opportunity to request transmission to that user of the Program's complete source code, you must not remove that facility from your modified version of the Program or work based on the Program, and must offer an equivalent opportunity for all users interacting with your Program through a computer network to request immediate transmission by HTTP of the complete source code of your modified version or other derivative work. Affero s addition (2.d) These requirements apply to the modified work as a whole. If identifiable sections of that work are not derived from the Program, and can be reasonably considered independent and separate works in themselves, then this License, and its terms, do not apply to those sections when you distribute them as separate works. But when you distribute the same sections as part of a whole which is a work based on the Program, the distribution of the whole must be on the terms of this License, whose permissions for other licensees extend to the entire whole, and thus to each and every part regardless of who wrote it. Thus, it is not the intent of this section to claim rights or contest your rights to work written entirely by you; rather, the intent is to exercise the right to control the distribution of derivative or collective works based on the Program. In addition, mere aggregation of another work not based on the Program with the Program (or with a work based on the Program) on a volume of a storage or distribution medium does not bring the other work under the scope of this License.

16 ..meaning that: Organization X...interact with users through a computer network Original work Some changes Derived work Requirement to publish the source code

17 Forthcoming GPL v.3 FSF is currently updating its flagship license (used in Linux, MySQL, etc) The final version will come out in Q3 (most likely) SaaS-loophole one of the hottest questions First and second draft allowed adding Affero-style requirement to the license No more single GPL?

18 Current formulation 13. Use with the Affero General Public License Notwithstanding any other provision of this License, you have permission to link any covered work with a work licensed under version 2 of the Affero General Public License, and to convey the resulting combination. The terms of this License will continue to apply to your covered work but will not apply to the work with which it is linked, which will remain governed by the Affero General Public License.

19 Flames to ensue

20 FSF`s plan

21 Further Legal considerations What is the nature of links between the applications ie. does all strong copyleft licenses require publication of these applications? Another big problem - there`s a wide range (other than GPL) of OSS-licenses already in use in SaaS-related software How to check automatically that components can legally interact? Open Source License Checker oslc

22 Business considerations In SaaS-NG, the value perceived by the customers will dictate more transparently the movements within supplier network Lock-in conditions are more difficult to create Perfect competition - profit margins will be diminished towards zero? Easy to reach global customer base Is there room for smaller suppliers or will economics of scale favor only the very biggest players? More likely in hardware, what about software?

23 Questions? Comments?