Software as a Service (SaaS) is all the rage these days. Everywhere you look, you can find a service to do something cool and useful at very low cost, and I hear plenty of people advising using them, because "if it's not your core business, it's not worth your time to spend on it." Last week I heard this concept put another way -- "if you're not willing to hire a team to support it, you shouldn't host it yourself."

At Freelock, that is not how we operate! Whenever we have some hole to fill in our business operations, we look around for an open source tool that might do the job, and only consider a SaaS as a last resort. Why? Because we're not interested in depending on platforms we have no control or say over.

There's something fundamentally wrong with the venture capital approach to funding tech startups. How many hundreds or thousands of software startups are there all trying to create a monopoly on their service offering?

I'll tell you one I'm subscribed to -- Mealpal. This startup charges about $84/month for 12 meals -- $7 per lunch, which in Downtown Seattle doesn't usually get you very far -- most of the time a similar lunch runs $10 - $12. I was just reading about how they pay out to restaurants more like $8-$9 per meal, so they lose money on every lunch! How does this make sense? It sounds like this is an introductory offer, and at some point they will charge customers more or pay restaurants less -- or run out of their stash of VC cash. I'm happy to have my meal subsidized by VCs for as long as it lasts, but if it disappears it's not going to hurt my business any.

Mealpal is a "B2C" company -- Business to Consumer. I see little harm in using SaaS for personal stuff. But as a business owner, I fail to understand why it's worth the risk to put something critical on a SaaS platform.

"Oh, but it's not my core business" I hear you say. "We do XYZ, we'll just outsource our (CRM, bookkeeping, project management, blog, whatever) system".

Ok, I might agree with you if we're talking about employee party planning for a single event, or other fun perks. But the rest -- if it's not mission critical, why are you doing it at all? I would argue that bookkeeping software, CRM, your website, how you manage your business is all mission critical. Why would you put any of that in the hands of a sole-source vendor, if you can own and control it yourself?

Which brings me to Basecamp.

Basecamp is a SaaS project management tool. At first glance, you might think "oh, another SaaS, John probably thinks it's crap." And yes, I don't choose to use Basecamp because it's a SaaS, but also because it doesn't really fit the way we run our business. But I do have a whole lot of respect for the people at Basecamp, and the way they have chosen to run their business.

For years I've been listening to their podcasts, starting with The Distance -- this is the podcast I wanted to create a decade ago, interviews with "ordinary" business owners who have long running businesses. Their new podcast, Rework, has gone into a lot more about business philosophy, building a responsible business that is not focused on growth or cornering the market or becoming the next Facebook or Google.

Today I was listening to their latest episode, Reblog, which details why they've moved their company blog from Medium to WordPress. They cited all sorts of reasons for this -- their freedom to change the layout, the ability to make long or short posts or galleries or whatever they want, the kindred nature of Automattic (the company behind WordPress), and much more. But they failed to mention the biggest reason -- WordPress is Open Source. While they may be using the hosted version at WordPress.com, that runs the same code as the open source WordPress.org, and at any point they can simply download their site and run it themselves.

The podcast is a great exposition of why WordPress beats Medium -- but entirely misses the why!

Here's the thing. Medium is a venture-backed company. It has raised $132 million USD to get where it is now -- and VCs only invest that kind of money if they think it has a good shot at getting at least 10x their money. It has been around for 7 years. How are these investors going to get their money back? Generally one of two ways (called exits): either the company gets bought by a much bigger company, or it goes public. Can Medium just stay "medium" sized and build a thriving business for the long term? Probably not with that kind of investment -- they are under constant pressure to go big or go home. And if they don't go big, well, they might just go home with your blog.

Even if they do have a successful exit, who's to say the service will keep things the way you like it? Some of the most successful startups got sold to Google, were declared a massive success for investors, and then the software got killed off a few short years later because it only had 10 million users.

All this to say, Basecamp and Automattic do not fit into that mold. Hmm ok maybe that's not quite right about Automattic, I see they have raised over twice as much as Medium -- but there's still that crucial difference of the nature of the core software.

If Medium closes their doors, bye bye blog. If Automattic closes their doors, toss your site up on the nearest web server and you're good to go, practically uninterrupted. That is the biggest value of open source. When you use a SaaS, you're simply a tenant in the building, with limited rights to do what you want to do with the property. With Open Source, you might spend more having a property manager (like us) to keep everything safe, secure, and in good shape, but you're not beholden to a particular vendor, and if the platform changes directions in a way you don't want to go, you don't have to go that way, you can fork and keep to the path you're on.

Now maybe the reason the Basecamp folks didn't bring up open source is because their core product, what pays their bills, is a SaaS, and they don't want people thinking too hard about open source alternatives (we think Taiga.io is a pretty compelling open source alternative, for example). But really, I think they do know better -- one of their founders, David Heinemeier Hansson who was even on this episode, is the original author of the extremely popular open source development framework, Ruby on Rails. Another reason to respect Basecamp -- they have certainly contributed hugely to the open source world.

So... to wrap up here, I don't think all SaaS is bad -- if you want to keep your costs down and use a SaaS, Basecamp is certainly one I would trust above others, mainly because they have built a profitable company and stuck to a clear core mission that makes me think they will be around long after the current trendy SaaS startups are long gone. But definitely check out their podcasts, well worth your time! And maybe we'll yank those social sharing links ourselves...

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Comments (3)

Thank you for the great insight. We've tried a few different CRM tools and apps. It's hard to find a low cost SaaS that is focused on a particular niche. We're going to give Basecamp a try.

11 Feb, 2019

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