Open-source economics

This graphs depicts the 10 companies with the most open source contributors according to: https://octoverse.github.com/

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

First applied to the open-source software industry,[1] this economic model may be applied to a wide range of enterprises.

Some characteristics of open-source economics may include: work or investment is carried out without express expectation of return; products or services are produced through collaboration between users and developers; there is 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.[2] 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.[3][4]

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."[5]

Incentives

Individual Incentives

While initially it could seem that contributing to open source software goes against basic economic principles, there are several reasons why 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.[6] 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 your time to a project you believe in. However, 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] If a person is a top contributor to open source software then they 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.[8]

Corporate Incentives

Corporations have several incentives to contribute to open source projects. One major reason is talent acquisition. Some software developers are huge proponents of open source software and if they have used a company’s open sourced software or are aware of it then they may be more interested in working for said company.[9] 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 amount 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.[10] That 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 than previously so it could also be beneficial for companies to open source to get free help.[11]

Effect on Corporations

Monopolies

Open source software can help protect against monopolies. For example, the rise of Linux, an open source computer operating system, helped prevent Microsoft from being considered a monopolist.[12] Microsoft considered Linux to be their main competitor during the 1990s.[13] 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 Libre Office. Internet Explorer has Chrome and Firefox as open source competitors. Wikipedia is dueling with Brittanica over encyclopedias.

Open Source For Profit Businesses

There have been numerous companies that have created a business around open source software.[14] They do this by publishing all of their code open source, then charging for training, certifications, add-ons, and other services. One example is a company called Red Hat who produces operating systems. Red Hat sells services such as 24/7 support, integration into company’s products, and training.[15] Red Hat was the pioneer for the open source business model and is valued at approximately $16 billion as of 4/28/2017.[16] Other examples include Mozilla, who creates the web browser Firefox, and Google who created Android, an open source mobile operating system based on Linux.

See also

References

  1. ↑ Josh Lerner, Jean Tirole. "Some Simple Economics of Open Source" (PDF). The Journal of Industrial Economics. Retrieved 23 February 2012.
  2. ↑ Josh Lerner, Jean Tirole. "THE ECONOMICS OF TECHNOLOGY SHARING: OPEN SOURCE AND BEYOND" (PDF). Page 28. NATIONAL BUREAU OF ECONOMIC RESEARCH. Retrieved 24 February 2012.
  3. ↑ Global Village Construction Set. "Open source ecology". Industrial Machines. Retrieved 24 February 2012.
  4. ↑ Arduino. "Open-source electronics". Retrieved 24 February 2012.
  5. ↑ Yochai, Benkler. "The Wealth of Networks". Chapter 3. Yale University Press. Retrieved 24 February 2012.
  6. ↑ "Incentives to Develop Free Software". www.linfo.org. Retrieved 2017-04-29.
  7. ↑ "Incentives to Develop Free Software". www.linfo.org. Retrieved 2017-04-29.
  8. ↑ "Incentives to Develop Free Software". www.linfo.org. Retrieved 2017-04-29.
  9. ↑ "Why do huge profit-oriented software companies contribute to open-source software when it is akin to doing charity work which runs against their commercial instinct? - Quora". www.quora.com. Retrieved 2017-04-29.
  10. ↑ "Why do huge profit-oriented software companies contribute to open-source software when it is akin to doing charity work which runs against their commercial instinct? - Quora". www.quora.com. Retrieved 2017-04-29.
  11. ↑ "Understanding Best Practices in Free/Open Source Software Development".
  12. ↑ "Microsoft, A Monopoly No More | Brookings Institution". Brookings. 2017-04-29. Retrieved 2017-04-29.
  13. ↑ "Microsoft, A Monopoly No More | Brookings Institution". Brookings. 2017-04-29. Retrieved 2017-04-29.
  14. ↑ "Top 50 Open Source Companies: Where Are They Now?". thevarguy.com. Retrieved 2017-04-29.
  15. ↑ Contributor. "Why There Will Never Be Another RedHat: The Economics Of Open Source". TechCrunch. Retrieved 2017-04-29.
  16. ↑ Contributor. "Why There Will Never Be Another RedHat: The Economics Of Open Source". TechCrunch. Retrieved 2017-04-29.
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