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Is Open-Source Software A Threat To The Economy?

You may recall a widely reported statement by a Microsoft executive that open-source software poses a “threat to the economy." This topic was visited in a round table discussion, titled “The State Of Open Source,” at the Summer 2001 LinuxWorld Conference, held at San Franciscos' Moscone Convention Center. The panel consisted of Jeremy Allison (of Samba fame,) Brian Behlendorf (Apache,) Dirk Hohndel (an XFree leader/developer) and Linus Torvalds; the moderator was Larry Augustine (CEO of VA Linux.) For a synopsis and photos of the round table, see Marc Merlin's report on the event.

The question Mr. Augustine actually asked the panel was “is Open-Source a threat to Capitalism?”, which is a bit more interesting than asking if the alleged threat impacts only the economy. Linus' immediate response was “who cares?” Jeremy Allison basically concurred with Linus. Dirk Hohndel was a bit more philosophical in his response; he stated that a challenge forces the challenged party (in this case, “Capitalism”) to examine and improve itself, and thus open-source will help improve the software industry in Capitalistic economies.

I was disappointed by the panel's responses. They missed a good opportunity to dispel any concerns raised by the question. The answer is fairly obvious: Open-Source software poses no threat to any type of economy. To the contrary, open-source actually strengthens the economy by freeing-up software capital expenditures for use in other areas and by improving overall software infrastructure. Open-source will impact revenue streams of proprietary software vendors (such as Microsoft,) so it is somewhat a threat to their economies. Recent history shows that even proprietary software vendors have profited nicely from open-source software, by building software products and platforms around open-source solutions. IBM's WebSphere product is a wonderful example of this. Apple Computer's new OS X operating system has borrowed heavily from FreeBSD and the Darwin project.

From a business perspective, the important aspects of open-source software are cost (free or minimal,) quality (the successful open-source products are excellent,) and ownership of source code (which can be critical for some organizations.) The net effect of these advantages is enjoyment of a substantial cost reduction by users of open-source solutions. Now, seriously, can anyone really claim that lowering the cost of doing business is a threat to either the economy or Capitalism? Looks more like a good old-fashioned efficiency improvement. The cost savings realized from open-source usage can be applied to other areas of business. This has already been happening for several years.

As previously mentioned, some proprietary software vendors have used open-source software as the foundation of commercial products. Apple Computer's OS X operating system is derived from the FreeBSD operating system and an open-source project called Darwin; it sells for around $100 per copy. IBM's WebSphere platform uses the Apache web server as its primary component. WebSphere is a high-end system, with a correspondingly high price tag. At least one expert has claimed that Microsoft used the FreeBSD TCP/IP protocol stack code for Windows 2000. These examples show that traditionally proprietary software companies have definitely found ways to leverage and profit from open-source software. Such examples are cases where open-source was used to accelerate and lower the cost of product development. IBM in particular has leveraged the advantages of open-source software better than any other company. IBM has been able to retain users of high-end IBM computer systems (mainframes and AS/400s) by porting Linux to those systems. Companies such as IBM derive a significant portion of their revenue from service contracts, so keeping customers in the fold has been a major accomplishment for IBM; the Linux operating system is a primary enabler of this feat.

Another way to leverage open-source is to offer open-source products that compliment related product lines. Cisco Systems is trying this strategy with their acquisition of Vovida (see Vovida develops open-source voice-over-internet protocol (VOIP) software. Cisco is betting that any software that enables people to utilize high bandwidth IP will be good for sales of other Cisco products.

An overlooked area where open-source software contributes strongly to the economy is in education of computer professionals. Educational institutions have been able to lower their lab costs using open-source products. Software engineers, programmers and system administrators (and those wanting to enter those fields) wishing to increase their skill sets all benefit from availability of low cost system software. There was a time not long ago when you had to pay $12,000/per-seat for a bug-ridden Unix C++ compiler (and wouldn't even think about asking for the source code.) The companies producing those types of products were having a very difficult time finding qualified personnel to fix the bugs and add new functionality. Not surprising, considering that few people had ever seen source code for such products and the only way most people could get hands-on experience using them was in the employ of companies using the products.

It is unfortunate that some software vendors feel threatened by open-source; they should respond by producing superior software (they can even use open-source components to do so.)

August 27, 2001

P.S. August 30, 2004 - Cisco System's aquisition of Vovida is paying off in a big way. At the Summer 2003 LinuxWorld Convention, Cisco kept the Vovida team under wraps but had a full line of internet telephone products on display. IP telephony is now a high-growth area. Cisco Systems executives have recently been quoted saying they expect sales of Cisco IP telephony products to approach two billion dollars per year. A company called Vonage offers a complete package of internet access and IP telephone service to both residential and business customers. Covad has just started offering the same services. AT&T has announced a partnership with Adelphia Communications to offer similar service. Looks like the flood gates are opening.

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Is Open-Source Software A Threat To The Economy? by Adrien Lamothe is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.
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