This is a bit of an op-ed, but given a lot of the events recently, I thought it might be good to think through the pluses and minuses of open source - particularly software, though could really apply to many disciplines.
I am largely convinced - both from commercial experience and personally - that open source is a net benefit at large, but I wanted to try and take a more quasi-academic approach and research the issue. As someone with History and Economic degrees I still value providing my sources, so I tried to put them in the end notes as well.
Open Source: Economic Impact
With a lot of the world economies on edge due to recent uncertainty, I thought it would be interesting to think through the economic impact of open source tools and services.
Open Source Advantages
Open source software and its proliferation is one of the greatest drivers of technical innovation and value that have helped any number of industries and individuals. The software delivery model has numerous advantages from the obvious freely available, automatically auditable, and modifiable for developers, to less obvious advantages such as helping promote newer and younger developers.
Where Open Source is Employed?
Open source software has for years been the unknown, unseen hero of any number of device manufacturers. Sony, Nintendo, NetApp, EMC, and any number of router providers rely on open source projects, such as FreeBSD, to help develop their bespoke appliances. The Top500 largest and fastest super computers have for decades been entirely running on open source software, primarily Linux, networking drivers, and lower-level kernel. The advantage for all of these companies for using open source software is immensely useful particularly at the low level. First these organizations do not have to "reinvent the wheel", the code is available and works to enable either the WiFi or CPU technology. The second advantage is that much of the lower level technology stack, while absolutely critical, is often very unprofitable to maintain. Imagine the type of work that goes into tracking down memory-leaks or other low-level issues, verse what marketers sell "cloud, cloud, automation, AI, AI". If hardware vendors push and maintain code in an open source community, it helps not only make the code more available, but it also gets tested by a wider community that essentially puts in additional free man hours. Intel's Joe Curley summed it up "It’s not a charity — this work is in everybody’s best interest. If we build innovative hardware, such as adding additional cores to a CPU, it delivers more value and causes people to consume more of our products." ^1
The Snowball Effect
In 2024, the Harvard Business Review released an attempt to estimate the value of open source projects. The paper has a lot of assumptions and mathematical experiments to try and come up with a number.
"The thought experiment is that we live in a world where OSS does not exist and has to be recreated at each firm that uses a given piece of OSS. Using the labor market approach, we calculate the labor replacement cost of each OSS package. To estimate the value for each package, we use COCOMO II (Boehm, 1984; Boehm et al., 2009) at the individual package level and then sum across all package values to obtain a supply-side labor market replacement value. Then, we scale the supply-side value by the number of times firms are using each package while removing multi-usage within each firm to obtain a demand-side value." ^2
What is interesting about the outcome is a snowballing of the level of effort verses the achieved value. Ignoring the specific numbers, which again have a lot of complex calculations and specific assumptions, the total estimated work involved to create all the commits and contributions to the Github projects reviewed was in the billions in USD. However, the value based on where the software was employed was in the trillions. There was a 1000x explosion in value from the work needed to the value the software provided.
The snowball effect in value, while impressive, is by no means hard to comprehend. Exposing code and knowledge freely for other community members to then take and build upon helps propagate knowledge, and that promotes further innovation.
Open Source and Business
Given the immense, inherent value of open source, in some ways it is surprising how difficult it can be to profit or sell open source software. Practically, however, it is quite easy to understand the dilemma: "Why pay for something free". The most common answer is the promise of support, but the real answer is sustainability. Any enterprise relying on a fundamental technology to run their business will want to have the project continue, and supporting the project will help sustain it. As cybersecurity becomes ever more critical at an exponential rate, it is in everyone's best interest to support and sustain projects to ensure the latest patches, best practices, and tooling continues to develop.
Organizations support open source projects in roughly three major ways: purchasing commercial licenses, contributing developer resources, and through donations. Donations of course are almost always welcomed if the project is set up correctly, though they are always hard to rely on. Contributing developer resources are also a vital source, but often they are done in the pursuit of the organization pushing its own agenda, example: Intel offering its C Compiler or drivers to the Linux Kernel. Purchasing commercial licenses model obviously is preferred by the developers of open source software since it gives the vendor more control over budget and terms of the agreement. It also grants the end customer or organization purchasing the license a stake in the project with guaranteed support from the vendor. For purveyors of open source software, unless the vendor is selling hardware that runs open source software, having a business-level engagement via a license makes a lot of sense.
Having worked in companies that sell open source software, the reality is not so straightforward. Often it can seem that "We're our number 1 competitor" when trying to actually sell. That is true, and certain customers cannot be convinced of a sale. However, having also worked in companies that are not open source, I have seen real benefits. Open source software vendors, if their project is popular and well respected, are almost guaranteed sales leads and interest. This organic interest and trust can help propel smaller organizations to international exposure, a level of which other non-open source providers of similar size simply cannot match without significant investment in marketing, outreach and other areas.
Knowledge Drives Economic Growth
In economic theory, a very prominent growth theory is the Solow-Swan model that theorizes that taking into account capital and labor, a key factor for long term growth is a factor of knowledge or technology. The technology could be actual tech, like the adoption of computers and Internet, or better legal policies, or just general manufacturing or production know-how. The model has a lot of empirical evidence, particularly when looking at developing countries.^3
No paradigm better enables the spread of technology and knowledge than open source. By definition it removes barriers to the dissemination of knowledge, making information, including source code, freely available for adoption, and has become a bedrock for growth and innovation.
TLDR
Open source technology injects a huge amount of value and economic benefits at both the micro and macro levels. Businesses large and small can benefit from open source software, whether its a multi-trillion dollar multi-national organization leveraging open source tooling and community hosting and testing, or a small-/mid-size company looking for more exposure, open source drives down costs for both tooling and reach. On an even broader perspective, given the value of community contribution - a 1000X multiplier vs the effort - countries and regions should be well incentivized to help facilitate and support open source projects as a broader economic growth driver.
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1. Arun Gupta and Joe Curley, "How Intel Supports Open Source from the Inside Out", https://www.intel.com/content/www/us/en/developer/articles/community/how-intel-supports-open-source-from-the-inside-out.html
2. Manuel Hoffmann, Frank Nagle, Yanuo Zhou, "The Value of Open Source Software", Harvard Business Review, (2024), https://www.hbs.edu/ris/Publication%20Files/24-038_51f8444f-502c-4139-8bf2-56eb4b65c58a.pdf
3. Abesalom Webb, "Revisiting the Solow Growth Model a Theoretical Examination of Technological Progress in Developing Economies", SvedbergOpen, https://www.svedbergopen.com/files/1720763035_(2)_IJMRE11042024PR37_(p_18-24).pdf
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Additional References:
- https://en.wikipedia.org/wiki/Open-source_economics
- http://www.congo-education.net/wealth-of-networks/ch-03.htm#3-1
- https://opensource.com/article/18/9/awesome-economics-open-source
- https://www.technologyreview.com/2022/04/21/1050788/the-changing-economics-of-open-source/
- https://www.library.hbs.edu/working-knowledge/the-simple-economics-of-open-source
- https://www.sciencedirect.com/science/article/pii/S0164121221002442
- https://interoperable-europe.ec.europa.eu/collection/open-source-observatory-osor/news/first-results-study-impact-open-source
- https://en.wikipedia.org/wiki/PlayStation_4_system_software
- https://www.linuxfoundation.org/research/open-source-funding-2024?hsLang=en
- https://www.svedbergopen.com/files/1720763035_(2)_IJMRE11042024PR37_(p_18-24).pdf
- https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model