The Real Cost Of Open Source Is...? - InformationWeek
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4/22/2008
09:41 AM
Serdar Yegulalp
Serdar Yegulalp
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The Real Cost Of Open Source Is...?

Word has been circulating about a Standish Group research report that's apparently guaranteed to turn heads.  "Free Open Source Software Is Costing Vendors $60 Billion" is apparently one of the claims made in this report, titled "Trends in Open Source," and while I haven't been able to get my hands on it, the press blurbs about it make me wonder what really is the best way to quantify open source adoption.  Talking about it

Word has been circulating about a Standish Group research report that's apparently guaranteed to turn heads.  "Free Open Source Software Is Costing Vendors $60 Billion" is apparently one of the claims made in this report, titled "Trends in Open Source," and while I haven't been able to get my hands on it, the press blurbs about it make me wonder what really is the best way to quantify open source adoption.  Talking about it as "lost" revenue doesn't seem to make much sense.

Here's an excerpt from the Marketwire press release about the report:

"Open Source software is raising havoc throughout the software market. It is the ultimate in disruptive technology, and while it is only 6% of estimated trillion dollars IT budgeted annually, it represents a real loss of $60 billion in annual revenues to software companies," said Jim Johnson, chairman, The Standish Group International.

Part of the reason why I eye the "loss of $60 billion" figure with a bit of suspicion is because it's always notoriously difficult to quantify what you're not selling.  If I use MySQL in house, and never even considered Oracle or SQL Server as a possibility, how does that translate into a loss for those two companies?  The biggest way I can see such a thing being quantified is if Standish is talking to people who, say, were already using a proprietary product and then switched away to an equivalent open source product.  That would be the most sensible way, from what I can tell, to quantify actual loss, especially since any hard numbers about open source adoption are always difficult to obtain and typically rely on self-reporting

But even that's not a complete picture, either.  If an open source product competes directly with what I offer, that's not much different from losing revenue to a commercial competitor: it's still an incentive for me to make a better product that people will want to pay for, or to change my business model in the long run if that's viable.  The source of the competition isn't terribly relevant when it translates out to the same thing in the end: evolve or die.

One other thing that towers over all of this, in my mind, is that every software vendor also is a software consumer.  If I sell a proprietary, closed-source software product (for instance, a high-end multimedia app), but I use open source software internally as a cost-savings measure, I still benefit from open source. So if open source is "raising havoc," as Mr. Johnson puts it in the quote above, it's putting money back into at least as many pockets as it is allegedly taking from them.

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