BusinessWeek's Sarah Lacey has a good article on two significant trends in the industry: On Demand systems and Open Source software. Whether it's Salesforce.com, RightNow or new stealth mode companies like Dave Duffield's WorkdDay, there's an argument that says that the old model of selling expensive Enterprise software for on-site installation is going the way of the dodo. Why pay millions and spend two years to implement a complex beast of a system when you can get results in weeks with the On Demand subscription models?
Having been through several failed on-site CRM implementations over the last ten years before three successful implementations of Salesforce.com, I have to agree. This is one case where paying more doesn't get you more, unless you count more delays, more complexity and ultimately more headaches.
Open Source software is adding a new twist to it. While most people wouldn't associate Salesforce.com with open source software, in fact, most of their infrastructure is running on open source technology, including Apache, the Caucho Resin application server among other pieces. Admittedly, Salesforce chose Oracle as their database system back when Larry Ellison was on their board and that was probably the right thing when they were getting started. But Salesforce has had more than their share of service interruptions due to database issues in the last year. Maybe a more modular approach would make an improvement there.
More importantly, if you look at other companies like RightNow or SugarCRM, then it's clear that you can build truly scalable On Demand systems using nothing but open source software.
It used to be that to go open source meant making trade-offs. For example, Open Office still never quite does as good a job as Microsoft Office. But when you get to the On Demand systems, I would argue that the open source systems are in many ways better than the traditional closed source on-site systems: Less complexity, better user interface, easier to use. That may not necessarily be due to the free availability of the source code, but more in the spirit of open source that focuses on the basics, not all the bells and whistles. And why is that? Because open source developers shouldn't be caught up in adding every feature under the sun in order to justify an annual upgrades.