I caught a review in Fast Company of an interview that Craig Newmark of Craigslist had with ABC's Nightline News. I didn't see the interview myself, but Fast Company did a good job highlighting the more important points, including the fact that Craigslist, which offer free classified ads, is killing the local newspapers.

Get this:
"...There was the complaint that the site is hurting the newspaper business, stealing away those who would buy classified ads. According to Nightline, this shift has created an annual loss of $50 million in San Francisco alone."

Fast Company further says:

"Why must Newmark and Craigslist answer for the papers' failings? Craigslist has become one of the top Web sites in the world (three billion page views per month) as new features and additional cities have been added to the line-up. Users preach the virtues of the free classified service. I think Craigslist shows the value of presenting people a free service with wide capabilities (Google also comes to mind). If anything, traditional media should learn from such online innovators and adapt more quickly to the new landscape, rather than complain about it."

Exactly, and spot on! He who creates the best innovative and cost-effective service wins the game. This includes Google, eBay, Amazon, and, of course, Craigslist. Moreover, this is also very much like the battle brewing between the traditional software powerhouses and the up-and-coming Web Services marketplace, including guys such as StrikeIron, Salesforce.com's AppExchange, and NetSuite's NetFlex.

While most SaaS providers and service marketplaces don't give away business applications and services like Craigslist gives away classified ads, the number of free or cheap business services available on the Web is expanding rapidly. For instance, I'm not sure you can buy better or more cost-effective mapping software for a business than Google Maps or create an auction site better than eBay, and those services are free or inexpensive, and best of all they're on-demand.

Moving up, you have guys like Saleforce.com and NetSuite who are providing world-class CRM applications as a service, using a subscription model that's only a fraction of the cost of traditional enterprise applications. Moreover, you have the emerging Web Services marketplaces that are providing application services that you can mix and match into composites using similar subscription models, again, at only a fraction of the price of buying complete packages or building those services yourself.

In addition, the notion of mash-ups is going to push this along even faster as we learn how to mix and match both content and services to create new abstractions for use in hybrid Web-delivered applications and in the enterprise through emerging SOAs. We could get to a point were most application services actually exist outside the enterprise and thus enjoy the resulting reduction in costs and the ability to leverage best-of-breed applications. This is the final destination of Web 2.0.

So, in the same way that the large newspapers are complaining about new free on-demand services such as Craigslist, it's clear that the larger software vendors are going to be singing the same blues and will have to adapt to survive as things move quickly to a SaaS model. In fact you may find that many of the major SaaS players are sucked up by the larger software guys to hobble this trend or to buy into this emerging market. Sometimes I wonder if they see this coming.

What's key here is that organizations can get better IT services through this trend and at a reduced cost of development and deployment. Moreover, as businesses change, the need to maintain both an architecture and a new paradigm is going to be critical, including developing their SOA as a platform for business processes and leveraging outside services (SaaS) to complete these processes.