economics « Irfan’s Corner on the Web

5Oct/061

The Economics of Open Source

When I was a newbie in the Open Source world, I always wondered why someone would bother to make a complex software and give it away for free! I once came across the GPL, and its 4 freedoms, those left me with doubts about the entire Open Source software model! I said to myself: I develop a piece of software, although the GPL allows me to charge for the sale of the software, but I have to provide the sources aswell, so the first customer can distribute it for free to my other prospective customers, and I'll only have one customer!! What the hell?? I'll go broke this way! I better return to the proprietary world and charge for the software and NOT provide the source along with it.

But of course I didn’t return to the proprietary world, and stayed and investigated abit more, I came across writings of Micheal Tiemann, Doc Searls and the renowned work "The Cathedral and the Bazaar" which cleared most of my doubts.

The Open Source economic model is the EXACT opposite of the proprietary model! Proprietary companies provide software at a substantial price, which includes support services. Open Source provides free software, but with paid support! So its like Retail vs Services for commodities model.

Open Source model allows various software companies to provide support for software which might have been developed by someone else, and it doesn’t lead to a saturated support services market! Because only the best companies survive. Whereas the Proprietary model naturally gives the software developer an advantage. I would call companies such as McAfee and Symantec "support companies" as they are providing solutions which keep your Windows installation running and remove malicious software. But they are providing support for a software which's source they do not have limited access to. The recent move by Microsoft to disallow access to the Windows Vista internals, should be a wakeup call for all support companies targetting non-open source software. In a proprietary world support companies are effectively second class citizens, and can be ditched by their "masters".

Making the source available and charging for support services, also leads to great software! A proprietary company can have a few great developers, some excellent quality assurance experts, an army of beta testers and provide software which is good. After release only two groups of people will actually see the code: The company's developers, and crackers/hackers! If the company's developer finds them, its a patch! If a cracker finds it; it’s a malware or a new virus, and users are exposed until the company patches the flaw. In the Open Source world, because the source code is freely available a lot more people have access to the source and ability to study it, find bugs fix it or exploit it. But the incentives in the open source world to exploit are less than in the proprietary world. Because the effect will be limited, mainly due to the enhanced security of most Linux deployments. Software such as IpTables, SELinux, LIDS etc. Make Linux so much more secure than any operating system I've used.

However "support" is not the only thing Open Source enables you to do. LAMP (Linux Apache MySQL and PHP/Perl/python) provides a great platform to innovate on and provide innovative services to people. Just Look around the Internet, and the quality of services is just amazing!

I (as many other people now think) conjecture that future software companies will be increasing support/services driven not based on the model of existing proprietary companies (eg. Microsoft). Google, the multi-billions dollar company, which made its wealth not from selling software like Microsoft, but from providing a service to its users, that is context sensitive ads, bases its software infrastructure mainly on Linux and Open Source software.