Wednesday, April 17, 2024

Putting a value on open source — how much is free software worth?


According to a new report by Harvard Business School and University of Toronto researchers,open source contributes trillions of dollars to the global economy. If you look at the direct supply-side valuation for widely used open source software, the valuation is $4.15billion. If you look at the demand-side figures, which cover all the indirect value generated by use of open source, open source software is worth $8.8trillion. When global gross domestic product for 2024 is estimated to be $109trillion, the value of open source comes into far sharper view.

Alongside this valuation, the report authors estimate that — if open source did not exist — companies would have to spend around 3.5 times more on their IT and technology investments to get the same results.

Yet open source communities often complain about not getting support for their contributors and committers. The work done to keep open source updated, free and available to all requires support and funding, yet the value that open source creates does not lead to success for those involved. While there might be many that are willing to contribute to projects in order to improve them or pay back to the community, there has to be long-term support available. The term committer for those who provide code also suggests what is needed – commitment.

The cost of open source

One of the biggest arguments against open source is that it involves taking from those that are willing, and allowing others to produce products or services that compete with the original providers. However, this misses one of the fundamental reasons why open source software can be successful. Many open source projects are concerned with what organizations need around their infrastructure components – these are the building blocks that IT teams can use to get started faster, without having to create their own tools from scratch.

The most successful open source projects — from operating systems like Linux and Android, through to databases like MySQL and PostgreSQL — provide that infrastructure requirement that then lets companies get on with innovating on top. Using these projects helps company IT teams avoid a significant opportunity cost. Any time you spend on building software to operate your business represents time and focus taken away from building your actual products that customers are willing to pay for. These open source projects also allow you to avoid buying proprietary software to fulfill that specific requirement.

The statistic on how much it would cost to run IT if open source software did not exist is, therefore, an illuminating one. It would cost CIOs and their companies 3.5 times to run their IT and software stacks, but this additional cost would not deliver additional services or customer value. Instead, the cost would either be higher to meet goals, or companies would have to economize and take longer to deliver on their goals.

Building sustainability for open source

In order to keep open source open, we have to work on how to keep those communities available and successful over time, so that companies don’t feel they have to move over to different software licenses. Multiple companies over the past few years have moved to source available licenses so they can protect their revenues and prevent competition. While these companies will argue they don’t sell ‘proprietary software’ and that they follow the ethos of open source, placing any restriction on who can use software is against the Open Source Initiative definition.

At the same time, some of the traditional routes that open source companies have followed in the past are no longer viable, such as only supplying support and services. The growth of cloud services has made it easier to get software without facing technical challenges around deployment, so many customers now rely on their cloud providers to take care of those problems.

To overcome these challenges and support open source contributors and community members, we have to look at how we approach delivering our software and our services together. Rather than closing off a software license, or relying on the unpredictable demand for support when things go wrong, we have to learn from the market that exists today. This may involve delivering your own enterprise service based around an open source software project using the cloud, either under your own brand or in partnership with the cloud providers.

The second approach we have to take around support and service businesses is to look at long term results. When you give software away for free and then get paid when people need help, it is easy to fall into the trap of thinking that customers will only need you when there is an emergency. Instead, open source companies have to concentrate on areas like performance and providing better results over time. Fixing a problem is valuable, but finding ways to improve results over time is more valuable still.

For everyone working in the open source economy, the Harvard Business School report demonstrates how the community has created billions of dollars of value for the world. However, to continue that process, we have to provide support back to the open source community so that contributors can be rewarded and companies can create sustainable models for themselves as well. Open source gets everyone working on innovation to go further, faster, opening up more business opportunities that would otherwise be unreachable.

Photo Credit: Shutterstock/ra2studio

Ann Schlemmer is CEO at Percona a leader in open source database software, support, and services. In this role, Schlemmer builds upon Percona’s legacy of open source excellence, leading the company on its mission to help businesses make databases and applications run better through a unique combination of expertise and open source software.

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