Open-source economics

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The ten companies with the most open-source contributors Number of open source contributors by company.png
The ten companies with the most open-source contributors
Technical report on open-source economics in Europe The impact of Open Source Software and Hardware on technological independence, competitiveness and innovation in the EU economy.pdf
Technical report on open-source economics in Europe

Open-source economics is an economic platform based on open collaboration for the production of software, services, or other products.

Contents

First applied to the open-source software industry, [2] this economic model may be applied to a wide range of enterprises.

Some characteristics of open-source economics may include: work or investment carried out without express expectation of return; products or services produced through collaboration between users and developers; and no direct individual ownership of the enterprise itself.

As of recently there were no known commercial organizations outside of software that employ open-source economics as a structural base. [3] Today there are organizations that provide services and products, or at least instructions for building such services or products, that use an open-source economic model. [4] [5]

The structure of open-source is based on user participation. "Networked environment makes possible a new modality of organizing production: radically decentralized, collaborative, and non-proprietary; based on sharing resources and outputs among widely distributed, loosely connected individuals who cooperate with each other without relying on either market signals or managerial commands." [6]

Incentives

Individual incentives

While initially it might seem that contributing to open-source software goes against basic economic principles, there are several ways in which people are incentivized to contribute to open-source projects. Some reasons are not strictly economically beneficial to the contributor, but are related to leisure activities. [7] People program as a hobby and are incentivized to contribute to open-source projects simply because they enjoy it. There are also altruistic reasons, such as creating a better world and donating one's time to a project one believes in.

There are also several economic arguments for producing open-source software. A potential economic benefit is the enhancement of a person's reputation or resume. [7] A top contributor to open-source software may get easier access to venture capital money or better access to jobs. Further, developing open-source software can be cheaper than purchasing commercial software, thereby saving a contributor money. [7]

Corporate incentives

Corporations have several incentives to contribute to open-source projects, including talent acquisition. Some software developers are huge proponents of open-source software, and if they have used a company’s open-source software, or are aware of it, they may be more interested in working for that company.[ citation needed ] For example, Twitter created Bootstrap, an easy-to-use framework for designing websites. Bootstrap is very popular and is used by many people. Therefore, by open-sourcing Bootstrap, Twitter is able to increase brand awareness due to the large number of people developing products with their software, which should help them attract talent.

It is common for companies to not open-source core parts of their products that are critical for business, but helpful auxiliary processes and infrastructure.[ citation needed ] This way, through open sourcing they get all the positive aspects of talent acquisition and branding, and do not give up market share.

By making a product open-source, more people can contribute. These contributions can help develop the software faster, so it may also be beneficial for companies to open-source to get free help. [8]

Effect on corporations

Monopolies

Open-source software can help protect against monopolies. For example, the rise of GNU/Linux, an open-source computer operating system, helped prevent Microsoft from being considered a monopolist. [9] Microsoft considered Linux to be their main competitor during the 1990s. [9] Many computer makers offer Linux or Windows for their users, and a large percentage of mobile phone and tablet operating systems are Android, which is a Linux variant. Not only are monopolies affected, but several other businesses with strongholds are affected. Microsoft Office has open-source competitors such as LibreOffice.[ citation needed ]

Open-source for-profit businesses

Numerous companies have created businesses around open-source software. [10] They do this by publishing all of their code open-source, then charging for training, certifications, add-ons, and other services. One example is Red Hat, which produces operating systems. Red Hat sells services such as 24/7 support, integration into company's products, and training. [11] Red Hat was the pioneer for the open source business model, and was valued at approximately $16 billion as of April 2017. [11] Other examples include Google, which created Android, an open-source mobile operating system based on Linux.

See also

Related Research Articles

<span class="mw-page-title-main">Network effect</span> Increasing value with increasing participation

In economics, a network effect is the phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products. Network effects are typically positive feedback systems, resulting in users deriving more and more value from a product as more users join the same network. The adoption of a product by an additional user can be broken into two effects: an increase in the value to all other users and also the enhancement of other non-users' motivation for using the product.

<span class="mw-page-title-main">Red Hat</span> Computing services company

Red Hat, Inc. is an American software company that provides open source software products to enterprises and is a subsidiary of IBM. Founded in 1993, Red Hat has its corporate headquarters in Raleigh, North Carolina, with other offices worldwide.

<span class="mw-page-title-main">Open-source software</span> Software licensed to ensure source code usage rights

Open-source software (OSS) is computer software that is released under a license in which the copyright holder grants users the rights to use, study, change, and distribute the software and its source code to anyone and for any purpose. Open-source software may be developed in a collaborative, public manner. Open-source software is a prominent example of open collaboration, meaning any capable user is able to participate online in development, making the number of possible contributors indefinite. The ability to examine the code facilitates public trust in the software.

Commons-based peer production (CBPP) is a term coined by Harvard Law School professor Yochai Benkler. It describes a model of socio-economic production in which large numbers of people work cooperatively; usually over the Internet. Commons-based projects generally have less rigid hierarchical structures than those under more traditional business models.

<span class="mw-page-title-main">Free and open-source software</span> Software whose source code is available and which is permissively licensed

Free and open-source software (FOSS) is a term used to refer to groups of software consisting of both free software and open-source software, where anyone is freely licensed to use, copy, study, and change the software in any way, and the source code is publicly available so that people are encouraged to improve the design of the software. This is in contrast to proprietary software, where the software is under restrictive copyright or licensing and the source code is hidden from the users.

Free/open-source software – the source availability model used by free and open-source software (FOSS) – and closed source are two approaches to the distribution of software.

Social peer-to-peer processes are interactions with a peer-to-peer dynamic. These peers can be humans or computers. Peer-to-peer (P2P) is a term that originated from the popular concept of the P2P distributed computer application architecture which partitions tasks or workloads between peers. This application structure was popularized by file sharing systems like Napster, the first of its kind in the late 1990s.

<span class="mw-page-title-main">Yochai Benkler</span> Israeli-American technology law expert, political economist, and author

Yochai Benkler is an Israeli-American author and the Berkman Professor of Entrepreneurial Legal Studies at Harvard Law School. He is also a faculty co-director of the Berkman Klein Center for Internet & Society at Harvard University. In academia he is best known for coining the term commons-based peer production and his widely cited 2006 book The Wealth of Networks.

Peer production is a way of producing goods and services that relies on self-organizing communities of individuals. In such communities, the labor of many people is coordinated towards a shared outcome.

OpenJDK is a free and open-source implementation of the Java Platform, Standard Edition. It is the result of an effort Sun Microsystems began in 2006. The implementation is licensed under the GPL-2.0-only with a linking exception. Were it not for the GPL linking exception, components that linked to the Java Class Library would be subject to the terms of the GPL license. OpenJDK is the official reference implementation of Java SE since version 7.

<span class="mw-page-title-main">History of free and open-source software</span> Aspect of history

In the 1950s and 1960s, computer operating software and compilers were delivered as a part of hardware purchases without separate fees. At the time, source code, the human-readable form of software, was generally distributed with the software providing the ability to fix bugs or add new functions. Universities were early adopters of computing technology. Many of the modifications developed by universities were openly shared, in keeping with the academic principles of sharing knowledge, and organizations sprung up to facilitate sharing. As large-scale operating systems matured, fewer organizations allowed modifications to the operating software, and eventually such operating systems were closed to modification. However, utilities and other added-function applications are still shared and new organizations have been formed to promote the sharing of software.

The Carr–Benkler wager between Yochai Benkler and Nicholas Carr concerned the question whether the most influential sites on the Internet will be peer-produced or price-incentivized systems.

<i>The Wealth of Networks</i> 2006 book by Yochai Benkler

The Wealth of Networks: How Social Production Transforms Markets and Freedom is a book by Harvard Law School professor Yochai Benkler published by Yale University Press on April 3, 2006. The book has been recognized as one of the most influential works of its time concerning the rise and impact of the Internet on the society, particularly in the sphere of economics. It also helped popularize the term Benkler coined few years earlier, the commons-based peer production (CBPP).

Companies whose business centers on the development of open-source software employ a variety of business models to solve the challenge of how to make money providing software that is by definition licensed free of charge. Each of these business strategies rests on the premise that users of open-source technologies are willing to purchase additional software features under proprietary licenses, or purchase other services or elements of value that complement the open-source software that is core to the business. This additional value can be, but not limited to, enterprise-grade features and up-time guarantees to satisfy business or compliance requirements, performance and efficiency gains by features not yet available in the open source version, legal protection, or professional support/training/consulting that are typical of proprietary software applications.

Proprietary software is software that, according to the free and open-source software community, grants its creator, publisher, or other rightsholder or rightsholder partner a legal monopoly by modern copyright and intellectual property law to exclude the recipient from freely sharing the software or modifying it, and—in some cases, as is the case with some patent-encumbered and EULA-bound software—from making use of the software on their own, thereby restricting their freedoms.

The open-source-software movement is a movement that supports the use of open-source licenses for some or all software, as part of the broader notion of open collaboration. The open-source movement was started to spread the concept/idea of open-source software.

<span class="mw-page-title-main">Open-core model</span> Business model monetizing commercial open-source software

The open-core model is a business model for the monetization of commercially produced open-source software. The open-core model primarily involves offering a "core" or feature-limited version of a software product as free and open-source software, while offering "commercial" versions or add-ons as proprietary software. The term was coined by Andrew Lampitt in 2008.

Revolution Analytics is a statistical software company focused on developing open source and "open-core" versions of the free and open source software R for enterprise, academic and analytics customers. Revolution Analytics was founded in 2007 as REvolution Computing providing support and services for R in a model similar to Red Hat's approach with Linux in the 1990s as well as bolt-on additions for parallel processing. In 2009 the company received nine million in venture capital from Intel along with a private equity firm and named Norman H. Nie as their new CEO. In 2010 the company announced the name change as well as a change in focus. Their core product, Revolution R, would be offered free to academic users and their commercial software would focus on big data, large scale multiprocessor computing, and multi-core functionality.

Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use the source code, design documents, or content of the product. The open-source model is a decentralized software development model that encourages open collaboration. A main principle of open-source software development is peer production, with products such as source code, blueprints, and documentation freely available to the public. The open-source movement in software began as a response to the limitations of proprietary code. The model is used for projects such as in open-source appropriate technology, and open-source drug discovery.

Microsoft, a technology company historically known for its opposition to the open source software paradigm, turned to embrace the approach in the 2010s. From the 1970s through 2000s under CEOs Bill Gates and Steve Ballmer, Microsoft viewed the community creation and sharing of communal code, later to be known as free and open source software, as a threat to its business, and both executives spoke negatively against it. In the 2010s, as the industry turned towards cloud, embedded, and mobile computing—technologies powered by open source advances—CEO Satya Nadella led Microsoft towards open source adoption although Microsoft's traditional Windows business continued to grow throughout this period generating revenues of 26.8 billion in the third quarter of 2018, while Microsoft's Azure cloud revenues nearly doubled.

References

  1. ↑ "The State of the Octoverse".
  2. ↑ Josh Lerner, Jean Tirole. "Some Simple Economics of Open Source" (PDF). The Journal of Industrial Economics. Archived from the original (PDF) on 14 April 2013. Retrieved 23 February 2012.
  3. ↑ Lerner, Josh; Tirole, Jean (2005). "The Economics of Technology Sharing: Open Source and Beyond". Journal of Economic Perspectives . 19 (2): 99–120. CiteSeerX   10.1.1.580.6198 . doi:10.1257/0895330054048678. S2CID   17968894.
  4. ↑ Global Village Construction Set. "Open source ecology". Industrial Machines. Retrieved 24 February 2012.
  5. ↑ Arduino. "Open-source electronics" . Retrieved 24 February 2012.
  6. ↑ Yochai, Benkler. "The Wealth of Networks". Chapter 3. Yale University Press. Retrieved 24 February 2012.
  7. 1 2 3 "Incentives to Develop Free Software". www.linfo.org. Retrieved 29 April 2017.
  8. ↑ "Understanding Best Practices in Free/Open Source Software Development". CiteSeerX   10.1.1.445.7134 .{{cite journal}}: Cite journal requires |journal= (help)
  9. 1 2 "Microsoft, A Monopoly No More | Brookings Institution". Brookings. 29 April 2017. Retrieved 29 April 2017.
  10. ↑ "Top 50 Open Source Companies: Where Are They Now?". thevarguy.com. Archived from the original on 3 May 2017. Retrieved 29 April 2017.
  11. 1 2 Levine, Peter (13 February 2014). "Why There Will Never Be Another RedHat: The Economics of Open Source". TechCrunch. Retrieved 29 April 2017.
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