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Does Open Source make business sense? Print E-mail
Open Source Movement or the Free Software Movement are considered by the general people akin to the hippy movements of the 1970s. This is probably so because they started from academicians and among students or probably because of the anti-estabilshment nioses make a common voice with them - or probably even because its leaders keep long berads like the hippies or GreenPeace volunteers. . .

In spite of these perceptions - the Open Source Movement has made a deep impact on the way economics of software industry works! And what is even more difficult to believe that Open Source makes a lot of economic sense. After all it isn't for nothing that Sun is going to release its ambitious 3D Desktop engine 'Looking Glass' under the Open Source umbrella. Read on to know what and how it makes sense .....

Unlike popular perception Open source software is not Free Software (though the concept of open source came out from the free software movement headed by Richard Stallman). The history of evolution of open source from free software will be an interesting read but let us not delve into it. Those who are interested should visit www.gnu.org and www.opensource.org for the historical backgrounds of both open source and free software movements.

Let us understand the concept of open source by example. Suppose a company called ‘SysInfo’ makes a new software to convert files of bmp format to jpg. Another company ‘Vpro Tech’ is engaged in writing a software to convert DAT files into mpeg. In present day circumstances, V-pro would have to write the whole software from ground zero. In open source environment, the source code of software is not proprietary. SysInfo will be bound to deliver the source code of the software to any interested party, however at a price quoted by it. If V-pro knows that the code by SysInfo will be useful to it, it may pay the price of the source code to SysInfo and obtain a copy. Thus V-pro need not waste its time reinventing the wheel (in this case the basic file conversion routines)

One would ask, what is in it for SysInfo? The answer lies in the second part of the open source license. The buying company not only pays the price to the SysInfo, it is bound by the license to share its own –improved – source code, free of cost with SysInfo and at its own quoted price with other 3rd parties. Simply speaking, any software which make use of another open source software in part or whole must itself also be licensed under open source.

Now, why does this all make business sense?

1. Why reinvent the wheel?

There are numerous companies developing software – add to that universities and student projects – one finds that most software need not be written from scratch. In fact, most can be ‘compiled’ from existing code snippets.

2. Why not make money at the middle of supply chain?

Most of us have heard about organizations optimizing their costs by selling intermediate products rather than final goods. For example some steel plants are selling services of their oxygen plants to other players since they themselves cannot use complete output from these plants.
If software companies wanted to do something similar, open source is the only way this could be done. Companies can sell their software code or parts of it to other companies and make money out of it, and support their bottomline.

3. Progress faster. Serve customers better

Today, most of the time companies are busy rewriting code which some other company has already written. If they could simply borrow this code, then more time could be invested in providing customers with more enhanced features in software or providing better customer support. Also technologies like Object Oriented programming can be utilized best only if code sharing is adopted by companies as a policy.

4. Compete on services and not products

The software industry is known as a part of service industry; but this definition is incomplete if the companies continue to rely on products and product-based royalties.

Companies will start competing purely on service grounds only when proprietary source code is out of picture. Under open source environment, since everyone will have access to the best of code at the same price, the real competition will be on how well you utilize available code and how well you service your customers.

In spite of all this ‘sense’ that open source software makes the tide is turning too slowly in its favour. This is because until the whole industry or at least one complete industry segment converts to open source, problems like code stealing and copyright lawsuits against open source software will continue. There is another serious drawback of open source software. If code goes on getting recycled then some inherent defects present in the first original copy may proliferate to all software which uses the original code.

An argument against this is that if the source is open then a defect is more likely to be unearthed than for closed proprietary systems. This argument may seem very logical but one must remember that the Y2K crisis happened due to an inherent defect in one of the library files which was virtually open for software programmers the world over. In conclusion, the benefits of open source software are definitely more than the problems that it may introduce. And of course it must make a lot of business sense if Sun is going to introduce one of its most ambitious projects under the open source umbrella.

NOTE: There are numerous variants of Open Source licenses and each has some or the other twists. For example, some licenses may allow you to use source code as a component but not allow the product itself to be sold standalone. Some may require you to redistribute source code free and not at a price etc. But the underlying spirit is to share source code and avoid reinventing the wheel. Some points of one of the most popular licenses the GPL (GNU Public license) are given below –

1. You may charge a fee for a copy, and you may at your option offer warranty protection in exchange for a fee.

2. You must cause the modified files to carry prominent notices stating that you changed the files and the date of any change.

3. You must cause any work that you distribute or publish, that in whole or in part contains or is derived from the Program or any part thereof, to be licensed as a whole to all third parties.

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