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Free Open Source Software Is Costing Vendors $60 Billion?
conan1989 writes to tell us that a recent report from the Standish Group is claiming that open source is costing the traditional software market somewhere in the neighborhood of $60 billion per year in revenue. "MySQL Marten Mickos has often spoken of 'taking a $10 billion market and making it a $3 billion market.' If you consider that open source has taken out $60 billion of traditional software revenues there will be a bloodletting in the proprietary world soon enough. It's a great time to be an open source company."
I pointed this study out yesterday during the "Is Open Source the Answer To Giving?" discussion and was promptly modded up, down, up, down, ad infinitum (probably because I was trying to merely provide the unpopular side/view of the issue but I digress).
More importantly, you should pay attention to the several insightful and interesting comments that followed which point out French Economist Bastiat's Parable of the Broken Window.
Whether you hate it or not, it does no good to ignore this contempt that so much of corporate America holds for open source! Take the time to inform your boss or coworker who claims losses directly to open source efforts.
My work here is dung.
This idea is an instance of the broken window fallacy. If the money had to have been spent on proprietary software, it wouldn't have been used for other things. In the end, FOSS software is a win for us all.
This kind of "Look how much money we're not making" is stupid regardless of who is espousing it. They're trying to prove a negative, and monetize a handful of nothing, and the sick part about it is that they honestly think that they're not completely crazy.
This is just like the RIAA trying to put a dollar figure on money lost to filesharing, or the press trying to put a dollar figure on "productivity loss" based on this or that sports event. They just need to get a freaking life, and start trying to measure things that exist.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
In the long run, it has balance out somewhere. Money doesn't disappear. It's the old overused notion of squeezing a balloon again... we have to figure out where the bulge is.
that open source is saving those vendors' customers $60 billion.
That would be "costing other software vendors" in the same sense that the RIAA and the MPAA are "losing money from piracy". It makes the HUGE assumption that everyone who uses open source software is someone who would otherwise have purchased the "traditional" software. This is simply not true. However human beings are very good at pulling numbers out of their asses, and since politicians are used to talking shit, they readily believe these numbers.
Wow, let's make a law that outlaws open source software, to "protect" the "traditional" software industry. At the same time it will fight terrorism (because terrorists use open source software) and help the children (because open source is BAD). Yes you sarcasm impaired mods, learn to spot it when you see it.
Seven puppies were harmed during the making of this post.
Right.
It's not costing anything. It's competing. Very effectively, I might add.
In the same frame of mind, I'd be curious to know if this group also considers IT a "liability."
The title should read "Free Open Source Software is SAVING CONSUMERS $60 Billion" It is not costing vendors a dime.
FOXTROT UNIFORM CHARLIE KILO
A lost sale is not a cost. You could just as easily say that Microsoft is costing Red Hat money by selling server OSes. That would be as ludicrous.
I imagine that the local bands selling their CDs for five bucks apiece is costing the RIAA labels tons of money too. Know ahet? I consider it a GOOD thing.
I also consider it a GOOD thing that free software "costs" Microsoft money. Because, you know, I hate their software, I hate their business methods, and frankly I don't care too much for Gates and Ballmer.
Your bad is my good. Costing you? Well GOOD! Well done, FOSS! Here's to you kind sirs!
mcgrew's razor: Never attribute to stupidity that which can be explained by greedy self-interest
You can say anything with statistics, particularly when you're trying to show how much something costs.
I can take that exact same stat, and say that it's given businesses a $60 billion saving. Just think how much more competitive our businesses are now that they're saving all that money!
So you see, it's a double-edged sword: a cost to one person is a saving to another.
The fact is that when you start talking about that sort of money, it's never actually as clear-cut as a single statistic can make it sound. Anyone who does try to boil it down to a simplistic headline like that is almost certainly trying to put their own spin on it. (and yes, that includes me)
Specifically, the closed-source software vendors.
Consider: No matter how much marketing you have, it is ultimately up to the end user of a product to decide if they've gotten the value they expected to get. If said user finds that the closed-source product they paid (possibly) big bucks for isn't worth the media it was recorded on, they're going to cut their losses and try something else.
Alternatively, there are many small businesses that simply can't afford the kinds of prices that closed-source vendors often charge. I know this for a fact, because I'm one of those tiny businesses! If not for FreeBSD, Apache, and Postfix, to say nothing of the surplus hardware market, I would never have been able to get my Internet presence off the ground.
It's not just Freeware, either. How many of us have found low-cost Shareware products to be incredibly useful for the stuff we do, when comparable commercial products would have nearly required a second mortgage? Hex Workshop is, I think, a great example.
If that $60 billion figure is accurate, the commercial software vendors have no one but themselves to blame. Oh, there are some good values Out There, yes, but I think they've been largely drowned out by the flood of questionable products that are turned out with far more marketing than quality engineering.
Happy tweaking.
Bruce Lane, KC7GR,
Blue Feather Technologies
In theory, money exists merely to facilitate the barter system by providing an abstract representation of wealth. We tend to associate a high dollar velocity with wealth creation, though the two are not really the same thing.
Open Source software is, by any reasonable definition, valuable. The individual programs are useful products that people want. Their existence makes the community (in this case, the whole planet) more wealthy. Therefore, open source is not the value-sink that its competitors would dress it up as being.
Well, open source itself is a reasonably new name, but certainly public domain or at least freely distributable software has been around for decades, and so far as I'm aware, has popped up in just about every operating system during that time.
The world's burning. Moped Jesus spotted on I50. Details at 11.
Of course, that means the open source vendors are providing over $60 billion of additional value to customers, who are able to divert whatever would be spent on proprietary software to more productive use.
In other words, it is making the overall market more efficient. That's just Economics 101.
For those who try to spin this as some sort of problem, can you imagine if a single company owned a patent granting them exclusive rights to produce what Apache provides for free? The gains to said company would pale in comparison to the astronomical loss to the overall marketplace.
-- My choice of computing platform is a symbol of my individuality and belief in personal freedom.
Oh man you gave me an idea for a NEW JAMES BOND MOVIE PLOT! A villain who secretly owns controlling stock in big wheelchair manufacture/sale companies engineers a virus that keeps fetuses from fully developing legs. This way he would have at least an entire generation that would buy his wheelchairs, and he'd make a BAZILLION dollars! Also he would have a wheelchair-bound henchwoman who is really hot and at the end it turns out she can actually walk (and fight using mad karate skills) but James Bond knew this all along because he slept with her twice already.
Genius plot.
I like basketball!!1!
- Non-Smoking is Costing Toback Industry $1200 Billion.
... (f*&k cnet btw.)
- Healthy Food is Costing McDonalds $4.2 Trillion.
- Singing is Costing RIAA $5.4 Quadrillion.
- Islam is Costing Jack Daniels $43 Billion.
- You not Giving Me You Money is Costing Me $120.000.
You name it
I don't think the broken window scenario applies to this situation. Nothing is being destroyed, so the question isn't one of having to buy something vs not having to buy it. The question is buying expensive vs buying inexpensive, which is simple supply/demand economics. I'd go even further, and suggest that the "loss" is fictitious. It is really an overestimate of the sales on the proprietary software vendor's part.
If there is a loss anywhere, it's that only a fraction of the $60 billion is winding up in the pockets of open source developers. Granted, they're in it for the satisfaction of writing well written code, and the peer recognition that comes from that, but it wouldn't hurt for them to see some green from it as well.
When our name is on the back of your car, we're behind you all the way!
If, instead of saying "open source has taken out $60 billion of traditional software revenues," the article said "open source has saved businesses over $60 billion in expense compared to traditional software," don't you think people might view it differently?
"National Security is the chief cause of national insecurity." - Celine's First Law
People in general aren't great innovators. Most "best of breed" products are just
rehashes of someone else's idea. They're cloned or bought from others who may or
may not have had any part in "innovation" either.
Innovation is just a buzzword used to sell pointless upgrades and justify
uncivilized business practices.
A Pirate and a Puritan look the same on a balance sheet.
As other's have pointed out in several ways, losing revenue to competition is not a cost. Putting that aside for the moment, I do think the soft cost of some of my proprietary sw choices over the years is a true cost. Let's say an IT staff spends 15% of the year dealing with the short comings of proprietary sw... if we tally that across the industry, I bet it's not that small a cost (even relative to imaginary $60 B loss). How much time has been spent dealing with mal-ware due to a particular OS (or its associated email clients) being insecure? I suspect that time represents a HUGE cost.
It may be costing the "traditional" software market 60 billion a year in revenue...
But consider therefore, that it's saving customers 60 billion and possibly a lot more (less costly for customers to maintain license compliance etc).
http://spamdecoy.net - free throwaway anonymous email - avoid spam!
Disclaimer: I'm far from an open source zealot, and while I've been 100% free software based for years, I'm currently 90% commercial software, both at home (which I personally paid for every single bit, not a single pirated software) and at work.
Seriously... thats silly. Open Source just diversify the market. Instead of SQL Server and Oracle saturating the market with a poorly suited solution, you have PostgreSQL and MySQL (and more) catering to a segment of the market which doesn't require SQL Server and Oracle, and let the big names (I use those 2, there's more) commercial ones fill up the rest of the market, or force them to add more value (for example, ETL, Datawarehouseing, etc) by making basic feature a commodity (if all you need is flat tables to run SQL on, you don't need Oracle).
So really, Free Software isn't taking money from anyone... they just force market expension. If free databases didn't exist, the commercial databases would have less features than now, and going after a smaller niche, to sell probably exactly the same amount of licenses as they are selling now.
If you release a crappy widget with bugs and someone else releases a good widget in which those bugs were repaired, they will eat up your market share. Given the availability of competition in providing/supporting Linux, your suggestion is crazy. The reason the question comes up is because there is no competition for the Windows product (Linux is a different kind of widget in this aspect). While you are correct that Microsoft are not the only commercial vendor, they are the only vendor which can sell Windows. Oracle may have a proprietary database, but it does have to compete with other (now even Open Source) database products. There is nothing keeping other databases from competing, whereas Microsoft can and does effectively stifle operating system competition by being so proprietary. This issue can be applied towards any company that acts like them. Imagine Oracle using some old patent to control SQL and not allow other vendors to incorporate it into their database.
Since Red-Hat as an Open Source vendor do not have control over their code after releasing it (which Microsoft retains), customers are free to find another company to fix those problems. They are also free to move to a competing distribution (an equivalent widget). In the broken window, the vandal is assumed to have a high likelihood of gaining the victim's business, which is clearly not the case with Linux. In addition, the placement of intentional bugs is likely to be noticed and/or otherwise publicized in the community, akin perhaps to the glazier not wearing gloves when he throws rocks at windows (fingerprints). The reward is not worth this risk, since nothing forces customers to stay with Red Hat should this kind of activity be made public.
Thus, Red-Hat has a huge incentive to provide good products and actual support, and also an incentive not to risk its reputation.
The development of the automobile is costing the traditional blacksmith industry an estimated $3 billion a year.
I guess you could say that the $10b database market didn't grow to that amount because of open source, but only if you're counting a loss of revenue per website hosted on MySQL (or each MySQL installation). However those websites wouldn't have existed if they had to pay for MySQL, or they would have used plain text databases, or some other technology.
A company moving from Oracle to MySQL should have its head examined.
On the other hand without MySQL, PostgreSQL, etc, Oracle and MSSQLServer could have far higher licensing costs that aren't actually a fair reflection of their value to the market. Oracle is still a stupidly high price, but there is OracleXE now.
It's survival of the fittest. Database costs were so high in the past, people felt it necessary to write alternatives, and over time those alternatives improved to be competitive because there was such a demand. This means that the market was never $10b in value, only in price for a short time until the unsustainable price created competition that brought the market down to its true value.
Oh, i'm wittering here now and someone who's studied finance and business will shoot me down anyway.
I think it applies the opposite way -- the fallacy of the broken window is that the shopkeeper is forced to spend money he otherwise doesn't have to. He spends money on the glazier, instead of the baker -- the glazier could then spend money on the baker.
In this story, the proprietary vendors are the glaziers. The glazier may indeed lose business, but it is no cost to the economy as a whole, and it is a benefit to the shopkeeper, who can now spend money on things other than software.
Don't thank God, thank a doctor!
if my livelyhood depends on fixing problems with my code, what incentive do I have to ship it bug-free to begin with?
In the free software world? If you ship a code that's malicious or intentionally defective someone else will fix it and leave you out in the cold.
In the non free software world? None at all. Every few years you will sell the same crap with a new GUI. M$ has proved this over the last 20 years.
Friends don't help friends install M$ junk.
Only aspiring monopolists count their competitors' revenues, and their customers' savings, as "losses".
Open source can be nice because it allows the customer of a particular piece of software who isn't big enough to get a modification made to have the ability to do it. Free software is another matter. This is a corporation's dream. Software that is created by individuals free of charge that the corporation can redistribute or sell support contracts for? Priceless. Redhat? IBM? They don't have to write the software, but they are enriched by the distribution and support of it. Yes there may be a net positive result to the economy when small businesses use the software but make no mistake the value of doing the actual programming starts to tend towards zero. Add outsourcing and offshoring and it will be only hobbyists that produce software. Interesting that the 'egalitarian' giving of software tends to hurt those who give it (who might sell their skills otherwise) and enrich those who would formerly have had to pay for the software.
This whole thing is backwards. All of software companies I've worked at, for the last 13 or 14 years, have benefited from Open Source Software at one level or another. In these cases anyway the products gained features, or time to market that would have otherwise taken years of manpower and money to develop in house. Has anyone bothered to explain this to the economists?
Do you know how much money home cooked meals are costing the restaurant industry?
Even if you believe the most likely number of bugs in your code is zero, that is not very different from believing that the number of bugs is higher. You should never act on the belief that your code is bug-free.
Now that is a pretty amazing achievement, and open source coders and the companies that support them should be congratulated.
That is a massive achievement, open source software it is already saving $60 billion dollars per year, imagine what will be achieved in five years time, savings of hundreds of billions of dollars per year. It would be virtually suicide for companies to stick with the millstone of closed source proprietary software and be stuck with the costs in the hundreds of billions of dollars.
Sometimes those knuckle heads just forget there are other companies besides M$ and M$'s profits are in reality other companies losses, let alone the 10 to 100 times hundreds factor of using their software even after you have paid for it (well it actually never stop paying for it until you finally crossgrade/upgrade to open source software and start making those billions of dollars of savings ;D).
Chaos - everything, everywhere, everywhen
No, windows and Linux are both OS platforms and are, for the purposes of development, equally open (otherwise no one could write software for either windows or Linux)... Apple begs to differ...
You missed the point. I'm not talking about competition in developing applications for the operating system. I'm talking about developing a replacement operating system which can take the place of Windows. Apple has not and will never do that because they cannot develop an operating system which can run Quicken, Taxcut and Halo 3 (as long as these continue to be based on Microsoft's proprietary Win32/.NET Windows architectures), no matter how furiously their fanboys beg to differ on their behalf. Consumer choice between products in the free market assumes that they are have strengths and weaknesses but are generally interchangeable. When you have to exchange not only the product, but your spending habits,
The false assumption here is that unless you choose open source you are choosing intentional bugs.
Is this is a straw-man or simply careless reading? I didn't and wouldn't claim that all commercial software is sabotaged. A correct reading leads to "commercial open source software cannot have intentionally placed bugs," which has no relation to "commercial software must have intentionally placed bugs." I didn't even go so far as to claim Microsoft (or your precious Apple) does this, only pointing out that others allege it and the exploring dynamics of such actions.
In addition you are assuming that there is some community dedicated to nothing but scrutinizing the source code of open source software as there is in a proprietary company (like apple).
Open source does have many people providing quality control. In important places (the kernel, major applications, etc) there are people on a full-time salary doing this just like at proprietary vendors. You must be reading the Microsoft FUD. Please note how artfully fear-mongering stats are taken from reliable sources and placed at the top of the references, while security related references are almost exclusively written by Microsoft's employees and tucked in at the bottom. This has little to do with reality, and proprietary QA personnel don't find the important
point of fact, Red-hat does not risk it's reputation since they are a support provider not the OS provider per-se...
This is perhaps the strangest thing you've said, not only because it's factually wrong in several places, but because it ignores the reality of human behavior. It's also way off topic, but I'll correct you anyway because it was a poor attempt at addressing the main point.
Software vendors' customers often have a minimal understanding of what they are "buying." You suggest to be knowledgeable and yet still don't even use the right term. How well do you think some Vice President understands copyright law and those crazy EULA's? RedHat actually used to sell boxed copies for under $100, which I'm fairly certain did not include a support contract. Now that downloading ISO's is easy, perhaps it's not economic to manufacture and ship discs of plastic containing software that can be downloaded freely.
Your understanding of RedHat's role is lacking. RH certainly is not the sole (and perhaps not even a major)