A peek into the crystal ball

Thursday, September 26th, 2013

This weekend I chanced upon and re-read my final University Thesis on Software Licensing from a Law and Economics Perspective. That’s how wild a weekend at the Nyman residence can be.

I realized when reading that my predictions about the future of licensing models came out right on the money. Especially the move away from Shrink Wrap Suite licenses and towards subscription and freemium models.

Interestingly enough, I hardly touched on technology to motivate the driving forces behind this, instead I simply applied a law & economics perspective and thought about how to calculate the actual cost of piracy and the Pareto efficiency of software pricing. Freemium models are totally Pareto, in case you were wondering.

So, let’s think about the driving forces for second location SaaS backup in a similar way and peek into the crystal ball.

Again, technology only plays a supporting role. To calculate efficiency we need to factor in e.g. robustness and speed in data transfers between systems, security in storage and transfer states, formatting and data relationship loss. We know that we can backup and restore data efficiently already today, and 3, 5, 10 years into the future we are likely to see substantial further technical improvements in all of these areas.

But, if the SaaS backup market keeps growing, will SaaS vendors then not be more likely to offer built-in backup solutions instead of giving away that business to specialised backup companies? Sure, vendors will try, but I see that as Shrink Wrap Suite thinking all over again. It’s the way product bundling used to work, not where we are heading.

Why do I think so? Well, let’s forget technology and think about things like efficiency, data ownership, data liberation, risk and responsibility for a minute.

A second location backup and a built-in backup by the SaaS app your data is created in, may both protect you against user mistakes and even malignant user behaviour. But, a built-in backup solution has a much harder time delivering protection against accounts being compromised by hacking or system failures that may render the service including the backup unavailable for a period of time.

What if there is a legal issue over payment or fair use between the customer and the SaaS provider? Where does the customer stand then in terms of data ownership and data liberation? Data ownership implies access and control. I would argue that without a second location backup, any company with data in a SaaS application, can not claim undisputed data ownership the second their service provider does not provide immediate access to the data, whether its because of a system failure or for legal or economic reasons.

Now think about Black Swans. I am convinced we only need one major SaaS data disaster before buyers will rationalize the occurrence of data disasters as something everyone needs to consider. The Black Swan theory teaches us to try to plan for limiting the effect of Black Swans – and the second location backup is precisely such a precaution.

Finally, let’s return one more time to the question if SaaS providers themselves should provide backup. From an efficiency perspective it seems clear they should not focus on offering their own backup solutions, but there is nothing stopping them from offering a second location backup that is technically and legally independent from their own service, as a service to their user. In fact, that is most likely the future Pareto efficiency state.

Seacrest Out.

Please drop me a note at marcus.nyman@cloudfinder.com  and let me know your thoughts about data ownership!

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