SaaS ISVs versus the Cloud Titans

Peter Offringa, in an excellent article just published on his Software Stack Investing blog, describes why SaaS ISVs have been succeeding against AWS, Azure and GCP - a group that I call the Cloud Titans.

“For a while, it seemed they [the Cloud Titans] would leave no room for independent providers in a land grab to address every segment of software infrastructure. As the landscape has matured and enterprises increasingly implement a multi-cloud strategy, it has become clear that independent providers can not only co-exist, but thrive, in this environment. Examples are Datadog for observability, Twilio for communications, MongoDB for databases and Fastly for CDN.”


I attended AWS’s massive re:Invent conference in 2018, and posted on this board a list of AWS services that appeared to compete directly with products from MongoDB, Okta, Alteryx and Twilio. I said at the time that the competition from AWS would bear watching. But a lot has changed since I wrote that post:…

For example, in 2018, AWS saw that MongoDB was adding proprietary features to the free and open source version of MongoDB. These features were available only to companies who bought the commercial version of MongoDB. AWS thought they could offer an open source, but fully managed version of MongoDB on their cloud, and just charge the hourly rate for the servers, and nothing for the software.

In doing so, they used the 3.6 version of the open source MongoDB code, put it on AWS on a souped-up, cloud-optimized storage layer, spread it across multiple Availability Zones, and called it DocumentDB. AWS was betting that developers would be attracted to the fact that DocumentDB would always be open source. And, to their credit, DocumentDB has attracted a lot of customers for that reason.

But MongoDB didn’t sit still. They kept adding advanced, compelling features, both proprietary and open source to MongoDB, and that version is now 4.4. So a lot of enterprises are having to make the decision about whether they want to stay with open source and use DocumentDB, which is now 8 versions behind the latest MongoDB, and only available on AWS - or whether they want to pay the MongoDB Atlas license to a) get the new features and b) have a database that runs anywhere, be it Azure, AWS, GCP or in their own data center. Many are choosing the latter option. This is one of the reasons why Atlas revenue grew 80% YoY in the latest quarter.