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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 wonder how this revenue is calculated. Is it done the same way that RIAA calculates lost revenue? If I install Open Office on my laptop, that doesn't mean that I would have bought proprietary software and put that on there if there were no Open Source options. Plus, is this factoring in the lower cost to develop software by using open source utilities?
If you are about to mod me down, keep in mind that this post was most likely sarcastic.
Will they NEVER stop whining.
It's pathetic.
Oh, my God, we need more Microsoft programmers.
Oh, my God, we need more h1b visa workers.
Oh, my God, the programmers we displaced are competing with us and winning.
Another fallacy that is often used in reports like this or reports on software piracy is the idea that every copy that is floating out there for free would have been paid for if the software was somehow not available for free--either legitimately through FOSS or illegitimately through piracy.
That's simply not true.
For example, I can download Apache Derby for free and have a SQL engine for my various projects. Had Derby and MySQL and the like not been available, I wouldn't go out and buy a SQL product--chances are, I'd home grow my own custom database. For many of my projects SQL is overkill, but because its free, I may as well use SQL than a couple of fixed-width flat files--even though fixed-width flat files would probably work just fine.
Back in the 80's I knew a fellow who collected pirated software. He never used the software--he just collected it because he thought it was cool. Realistically, had it been impossible for him to collect software he would have never bothered. So realistically speaking while he had thousands of dollars of pirated software on his computer, because he never used it or had any need for the software he copied (it was just a weird hobby of his), he would never buy the software even if it was impossible for him to otherwise obtain copies. So he never represented a sale to the software makers whose wares he was copying.
One also has to wonder what economic benefit has arisen from FOSS. While its true that, for example, I'd hate to go into the database business--it's a complicated business and there is no money to be made because of MySQL and Derby and other free database engines out there--end-user applications seem to be thriving. "Infrastructure" software--stuff like databases and web servers and the like have become free, and going into a business to sell a $10k software solution to compete against Apache Tomcat would be silly. But on the other hand, how much value has been built on top of that infrastructure that simply wouldn't exist if that infrastructure was expensive and the barrier to entry high?
You beat me to it. The presumptions made by the statement are staggering.
One of the presumptions I find most distasteful is the presumption that proprietary/commercial software vendors are somehow entitled to income from sales. I have issues with such business models in the first place. I don't believe they are entitled any more than I am entitled to a paycheck simply because I offer my services to the highest bidder as an employee. I get paid when I do work.
F/OSS doesn't "cost" other business money and doesn't cause losses any more than natural competition between commercial competitors causes loss or "costs" a business its 'entitled income.'
The slant of the statement is against F/OSS, but it's making a terrible argument against it.
Among the things I like about F/OSS is that 'providers' of such are offering service and assistance to support the use of software they do not control. The user is in control which means there's no vendor lock-in and less incentive for the vendor to abuse the customer. This creates a business model where the vendor will actually have to WORK or offer something of value to the customer. In the case of commercial software vendors, the incentive is to do as little as possible and to guarantee NOTHING (read a EULA).
What F/OSS does is cause competition that is hard for proprietary/commercial vendors to beat. That's "competition" and not a "cost" or a "loss."
Exactly.. Modern day business does not see newer and efficient designs are better... They see it as a threat to their business..
:)
OSS from my experience only works in mature marketplaces. Meaning, you do not see OSS products going after fast moving software products such as Solidworks, etc... You only see it in mature slow moving companies... Meaning, OSS is just capitalism at work.
I think both you and the Standish Group are making a mistake I call the RIAA fallacy. That's the assumption that every time somebody gets something for free (or very cheaply) it subtracts one from sales of a more expensive equivalent.
The truth is that cost often determines whether something gets purchased at all. If new cars are too expensive, people will make their existing cars last a year or two longer. (Or not replace their horse-and-buggy with a car, an insight that made Henry Ford rich.) People didn't even see the need for a personal computer until they became cheap enough for everybody to afford one. And if upgrading its IT is too expensive, a company will very likely make do with its existing IT.
The Broken Window fallacy is not directly comparable
The fallacy in this case compares to this; copyright in combination with proprietary software forces people to pay for something they otherwise would not have to (breaks the window) (note that this applies to the current discussion when we're actually talking about OSS replacing proprietary software, but it is also appropriate when considering forced upgrades (but less when we're talking of proprietary software without replacements)). This creates a revenue stream, measured economic activity, for some vendors (window makers). When one engages in this fallacy one disregards that the cost came from somewhere; the people paying for the software when they were _satisfied with the previous version (free) or free version (also free)_.
When they pay to replace something they were happy with they lack the funds to pay for more pots or pans, meaning someone else is losing the economic activity elsewhere, activity that would have created _new_ wealth.
goes up overall throughout the population.
That effect is more appropriately compared to the deadweight loss of monopoly pricing tho (revenue is maximized at a price level where some consumers are deliberately priced out of the market, but due to lack of competition, far, far above competetive price per unit).
Combine the broken window fallacy and monopoly pricing and you can come up with fairly huge theoretical numbers that intellectual monopolies cost society. One could easily come up with calculations supporting indications that a quite significant percentage of GDP is lost.
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?
I don't know which is better economically, and I don't care. What I do know is that the latter scenario describes a more interesting world that I'd be happier about living in - that means more to me than any reasonable amount of money.
>>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.
Are you kidding? Before Ethereal/Wireshark I paid $5000 for a packet capture package. This was about 12 years ago. We paid for software updates yearly. We had to have this type of software. Now I use Wireshark. That is a loss of revenue to that vendor. In fact, I'm almost certain they are out of business.
I paid for DNS/DHCP software for Windows from Checkpoint for a few years (they were ports of BIND with GUI interfaces) until I became comfortable enough with *nix to go that route. That's about $10,000 of software and thousands in support. Checkpoint no longer owns META/IP..
I paid for a proxy server from IBM. Now I use Squid. I don't want to tell you how much a Midrange (not PC) Proxy server costs.
The point is, I am spending less in software. Thank god & finally. DOS use to be $60. Now Windows Ultimate is $500. IBM PC's were $2000+ in the early 80's. and now I can find them for $199 on the low end. I can buy a PC for less than the OS.
http://blogs.zdnet.com/BTL/?p=8440
The article's terrible economic reasoning is exactly the kind of folly that dooms planned economies. The defense of established interests is cast as defense of the common welfare, and the economy gets gummed up with mandatory crud that is deemed essential even though nobody wants it.
In a market system, companies aren't be allowed to justify their existence through whining. If a software vendor can't offer something that people want to buy, then they serve no economic purpose.
If you think open-source software "costs" the economy money by displacing commercial software, then I suppose you also think it's a straightforward win to ban cheap, superior imported goods so domestic manufacturers can sell inferior, overpriced goods.