Open Source Companies Are Becoming SaaS Companies

For many years, WooThemes was the biggest brand name in WordPress.

Last month, they killed that brand and redirected everything to WooCommerce.com. Was there shock in the WordPress world? Absolutely not. The general reaction was, “What took them so long?”

So, how did we get to the point where the end of such a famous brand was inevitable?

I think it’s because we’re entering a new era. Major open source companies are becoming SaaS companies.

The WooCommerce story seems like a miniature version of a larger story:

• 2006-2010: Themes are hot (WooThemes)
• 2011-2015: Plugins are hot (WooCommerce)
• 2016 onwards: SaaS is hot (WooCommerce introduces SaaS services)

Let’s take those eras one-by-one …

2006-2010: Themes

Many CMS businesses started with themes, but they’ve been rapidly fading in importance.

Take a look at the WooCommerce post explaining their brand change. The theme business is covered in a few short FAQs at the end. Yes, they will do something with our themes, eventually, but they didn’t want to hold WooCommerce back. A year ago, themes accounted for only 15% of their overall business.

iThemes not only relegate themes in importance on their site, their slogan is “your one-stop shop for WordPress plugins”.

The makers of the Genesis Framework have seen that business far surpassed by Rainmaker, their hosted alternative to WordPress.

Why did themes fade away?

• ThemeForest took a huge percentage of the market.
• Most themes are not unique enough to justify a premium price.
• It’s not easy to build an ecosystem around themes.
• Themes are not often updated, so you can’t convince many people to become long-term customers.

2011-2015: Plugins

In many ways, we’re still in the era of plugins. Most of the biggest WordPress brands are currently plugins: WooCommerce, Gravity Forms, Yoast SEO and many more.

WooCommerce launched in 2011, the same year as Yoast SEO, and both have grown rapidly ever since. Most major plugins arrived slightly before or after 2011.

Businesses can build a real, unique ecosystem around their plugins. And it’s easier to create long-term customers because many plugins focus on e-commerce, SEO or other important mission-critical features.

2016 onward: SaaS

This year, we’re starting to see growth in the number and quality of SaaS integrations with CMS platforms.

OptinMonster moved from being a WordPress plugin to a SaaS service and has seen enormous growth. iThemes has several plugins that rely on SaaS.

The first big purchase that Magento made after becoming an independent company again? RJMetrics, a hosted analytics company. Their first big launch? A cloud platform.

In Drupal, Acquia has always been a hosting company, and is now heavily focused on developing powerful SaaS integrations for Drupal, such as Acquia Content Hub and Acquia Lift. All the important data from Lift is hosted by Acquia, but the connector module is on Drupal.org and Lift features are available inside Drupal, as in the image below:

Automattic s really pushing ahead here. JetPack now has a team of about 10 developers and gets constant attention. Compare that to some other Automattic plugins such as Job Manager and EditFlow, which have been almost abandoned.

And, take a look at what’s new with WooCommerce since the Automattic acquisition. WooCommerce Connect is the biggest change and “is a big part of our vision for the future of WooCommerce”. WooCommerce Connect already provides USPS shipping configuration and you can expect to see many more shipping options soon. Just this week, they announced that WooCommerce connects and automatically syncs with Square for PoS purchases.

Plugin businesses had several significant advantages over theme businesses. And so in turn, SaaS products have significant advantages over plugins. With SaaS, you have the opportunity to create a more reliable product that requires less maintenance by the client.

You also have the chance to build a more sustainable business. Think about the themes and plugins and SaaS services you pay for. Is it fair to say that you pay for themes once, plugins a few times, and SaaS services every month?

Can open source and SaaS live together happily?

Does the growth of SaaS have to mean the decline of open source?

Possibly, although it doesn’t have to be a zero-sum game. Yes, SaaS services will inevitably take some market share, but they can also empower open source products.

Again, the Automattic example is relevant. Take a look at the new features in JetPack and WooCommerce. They aim to leave users with the flexibility of a WordPress plugin, while off-loading many of the most difficult e-commerce tasks to SaaS. Now, that is a bright promise for this new era.

If you’re an open source user, it’s worth looking at SaaS services that can make your workflow easier, while leaving you the flexibility of open source.

If you run an open source business, now’s the time to think about adding some SaaS services to your offerings.