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Free Open Source Software Is Costing Vendors $60 Billion?

Posted by ScuttleMonkey on from the good-time-to-be-open-source dept.

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."

13 of 384 comments (clear)

  1. Broken Window Fallacy by eldavojohn · · Score: 5, Insightful

    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.
    1. Re:Broken Window Fallacy by someone1234 · · Score: 5, Insightful

      What is a loss for proprietary software providers is a win for former proprietary software users.
      And to be honest, the latter are a bigger group, since the former is soon to be only M$.

      --
      Patents Drive Free Software as Hurricanes Drive Construction Industry
    2. Re:Broken Window Fallacy by Cedric+Tsui · · Score: 5, Insightful

      You're absolutely right!
      The standard example I've seen in economics classes is that if you pay for a tow company to come boost your car, you gain benefit from it, and this is reflected in the GDP (a monetary index of the quality of life... sorta). If instead, you get a boost from your neighbour, you also benefit, but the GDP does not increase.

      This doesn't mean that paying for a service improves the national quality of life more than getting it for free. It simply means that money is a poor means by which to measure the quality of life.

  2. Broken Window Fallacy by QuoteMstr · · Score: 5, Insightful

    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.

  3. Stupid. by SatanicPuppy · · Score: 5, Insightful

    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.
  4. Creation of Wealth by Brain-Fu · · Score: 5, Insightful

    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.

  5. Broken Window Fallacy doesn't apply by camperdave · · Score: 5, Insightful

    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!
    1. Re:Broken Window Fallacy doesn't apply by unlametheweak · · Score: 5, Insightful

      There is no actual loss, but at the most a theoretical loss. One cannot lose something that one does not have. So yes one could say such losses are fictional because they never really occurred. One could say I lost money during the tech bubble because I never invested in Amazon.com etc when these stocks were rising quite quickly, but in reality I still have what I had before; which is basically no money.

    2. Re:Broken Window Fallacy doesn't apply by Shotgun · · Score: 5, Insightful

      If Windows 3.1 gets thrown away because Windows 95 is on the scene, and you have to spend another $100 for the same functionality, something was most definitely lost.

      Code is lost all the time in a proprietary world. Lost long before its usefulness is fulfilled. The end can come in the form of a large corporation buying out the upstart competition, a large corporation trying to keep you on an upgrade treadmill, or a small vendor letting a subpar product with some superb features dying off of natural causes. Regardless of the reason, in a world with open code, the community has the ability to retain good code. The closed world has an incentive to make sure your Windows all get broken on a periodic basis.

      --
      Aah, change is good. -- Rafiki
      Yeah, but it ain't easy. -- Simba
    3. Re:Broken Window Fallacy doesn't apply by mr_mischief · · Score: 5, Insightful

      Truthfully, the Open Source and Free Software probably hasn't cost proprietary vendors much at all. The people who want to pay for support contracts and warranties still do so.

      The biggest economic difference is that thousands or tens of thousands of businesses that never would have had a chance to start or that would have started deep in debt are now running software they didn't have to borrow to buy. People are running businesses on software in which they've made little or no investment above the cost of the hardware on which to run it.

      These people are loosening the labor market since they're not working for someone else any longer. They pay rents for office space, they need accountants either on staff or on a consulting basis, they need business insurance and legal advice, and they advertise. These are expenses they never had while they were employed elsewhere, and those companies that get paid for rent or for legal, marketing, accounting, or insurance services make more money.

      What's better in the long run? Is it better for a few dozen big and a few hundred small software vendors to make the money and grow bigger, or is it better for the money to be spread out among tens of thousands of businesses in thousands of communities?

    4. Re:Broken Window Fallacy doesn't apply by nasor · · Score: 5, Insightful

      In order to accept that every person who uses OSS that they got for free is a lost customer who would have purchased non-OSS software, you have to accept that demand does not go up as price goes down. Which is clearly absurd.

  6. It's all in the spin... by msauve · · Score: 5, Insightful

    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
    1. Re:It's all in the spin... by bill_kress · · Score: 5, Insightful

      Exactly! It's actually fairly inflammatory and unnatural to say that it costs the software industry $60b, you pretty much have to go out of your way NOT to say that it is "Saving businesses $60b a year which, of course, is passed on to consumers".

      Not only that, but it is creating some fantastic zero-cost startups. How many small companies start with no investment at all on a few copies of eclipse, mySQL and a few other free products when their alternative is to either steal or pay licensing fees they can't afford?

      It must be hard coming up for excuses for your stupid stagnant products when free Open Source products are beating them in every way.

      I guess the only alternative is to start spreading some kind of FUD and try to get Open Source declared un-american or something. Maybe you could start out by buying a few articles in tech mags and somehow trying come up with some twisted view of it that might make it sound bad...