Free Open Source Software Is Costing Vendors $60 Billion? 384
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 $60 billion of traditional software revenues there will be a bloodletting in the proprietary world soon enough. It's a great time to be an open source company."
Broken Window Fallacy (Score:5, Insightful)
More importantly, you should pay attention to the several insightful and interesting comments that followed which point out French Economist Bastiat's Parable of the Broken Window [wikipedia.org].
Whether you hate it or not, it does no good to ignore this contempt that so much of corporate America holds for open source! Take the time to inform your boss or coworker who claims losses directly to open source efforts.
Broken Window Fallacy (Score:5, Insightful)
Stupid. (Score:5, Insightful)
This is just like the RIAA trying to put a dollar figure on money lost to filesharing, or the press trying to put a dollar figure on "productivity loss" based on this or that sports event. They just need to get a freaking life, and start trying to measure things that exist.
In the end (Score:2, Insightful)
Perhaps a better way of phrasing it would be (Score:5, Insightful)
Re:Broken Window Fallacy (Score:5, Insightful)
And to be honest, the latter are a bigger group, since the former is soon to be only M$.
New Math (Score:5, Insightful)
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.
VP-speak is annyong. "Costing??" (Score:5, Insightful)
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."
COMPLETELY 100% WRONG (Score:4, Insightful)
Bullshit (Score:5, Insightful)
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!
A $60 billion double-edged sword. (Score:5, Insightful)
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)
Your IT department. (Score:1, Insightful)
Does your local city government have a utility department that installs and repairs water pipes? Then that city government is stealing business away from local plumbers.
Do you cut your own hair or shave your own beard? Then you are stealing business away from your local barbers.
Absurd, isn't it?
They have only themselves to blame... (Score:5, Insightful)
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, [freebsd.org] Apache, [apache.org] and Postfix, [postfix.org] to say nothing of the surplus hardware market, I would never have been able to get my Internet presence [bluefeathertech.com] 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 [bpsoft.com] is, I think, a great example.
If that $60 billion figure is accurate, the commercial software vendors have no one but themselves to blame. Oh, there are some good values Out There, yes, but I think they've been largely drowned out by the flood of questionable products that are turned out with far more marketing than quality engineering.
Happy tweaking.
Creation of Wealth (Score:5, Insightful)
Open Source software is, by any reasonable definition, valuable. The individual programs are useful products that people want. Their existence makes the community (in this case, the whole planet) more wealthy. Therefore, open source is not the value-sink that its competitors would dress it up as being.
Re:Traditional? (Score:3, Insightful)
and M$ is a vandal. (Score:1, Insightful)
The poor stability of Windows points to a more accurate version of the broken window parable, where the glazier is also the vandal. [slashdot.org]
Re:Perhaps a better way of phrasing it would be (Score:1, Insightful)
The figure is merely a testament to value (Score:4, Insightful)
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.
Re:Broken Window Fallacy (Score:1, Insightful)
Paying MS $200 has some benefit, but given the size and bankroll of MS that money probably won't make it into the economy any time soon.
If you put Linux on the system and take the same $200 and give it to the workforce, or buy supplies, or other items from smaller companies, that money will start circulating faster.
So what the study should really say is that $60B has been circulated into the economy that would otherwise have stagnated in the accounts of a large and distant corporation.
Yeah for FOSS! Without which the economy would be in even worse shape.
Re:Wheelchair industry (Score:4, Insightful)
Genius plot.
In other news ... (Score:3, Insightful)
- 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
Broken Window Fallacy doesn't apply (Score:5, Insightful)
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.
It's all in the spin... (Score:5, Insightful)
Re:Perhaps a better way of phrasing it would be (Score:2, Insightful)
sheeesh.
Re:Somebody would have written it (Score:3, Insightful)
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.
Re:Broken Window Fallacy (Score:5, Insightful)
With open source software there is no overall economic loss, but instead there are economic gains (assuming this open source software is in fact free of financial restrictions). The economic gains are seen (at the least) from the adoption and use of this software from people that could not or would not otherwise use such software; and so the standard of living (and quality of living) goes up overall throughout the population. The only downsides are that closed source software has competition (and competition is never a bad thing).
Open source software (as with all things that are added to the 'market') creates wealth; the difference being that with closed source proprietary software this wealth is more concentrated (within the company that creates the software and the customers who successfully exploit this software for their own ends), whereas with FLOSS this wealth is (or at least has the capability of being) distributed more broadly throughout the population. Of course I'm not talking about 'wealth' from a purely monetary perspective, but from the economic perspective as wealth being a 'good' or a 'service'.
Re:Broken Window Fallacy doesn't apply (Score:5, Insightful)
Re:Broken Window Fallacy (Score:5, Insightful)
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.
Re:It's all in the spin... (Score:5, Insightful)
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...
Re:Broken Window Fallacy doesn't apply (Score:5, Insightful)
I agree. The question, in many cases, isn't buying expensive vs buying inexpensive, it's buying vs not buying. This seems to be using the same flawed reasoning that the BSA and RIAA use in estimating their losses due to piracy - that every instance of piracy translates directly into a lost sale. In this case, they seem to be assuming that every use of OSS translates to a lost sale of proprietary software. That simply isn't the case. How many businesses would make do with, say, Microsoft Access (which they likely already have) if they couldn't install MySQL or Postgresql rather than pay the thousands of dollars to buy Sql Server or Oracle?
Re:Broken Window Fallacy doesn't apply (Score:5, Insightful)
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.
Re:Broken Window Fallacy doesn't apply (Score:5, Insightful)
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?
Re:Broken Window Fallacy doesn't apply (Score:3, Insightful)
Re:It's all in the spin... (Score:4, Insightful)
The initial investment in proprietary software can be thousands of dollars or millions of dollars to start a business, depending on business type and scale. Both have ongoing costs. Which is more likely to save money, if ongoing support costs are comparable? Which is a small startup more likely to be able to finance?
Re:Broken Window Fallacy doesn't apply (Score:3, Insightful)
Nothing is being destroyed, so the question isn't one of having to buy something vs not having to buy it.
The broken window fallacy isn't about breaking things, it's about not taking into account hidden costs. It's perfectly applicable to the situation, as the money NOT going into buying non-OSS software goes into something else (that produces more value).
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.
I think that's true as well. There's multiple failings of this dumb "costs the industry 60 billion" argument. It also doesn't take into account any gains the software industry itself makes from OSS.
Re:Creation of Wealth (Score:1, Insightful)
Stating that potential earnings that aren't met is a loss, is one of the biggest bullshit spin arguments ever made.
No. I do not buy that FOSS is "Costing Vendors $60 Billion". I would buy that FOSS at present is worth $60 Billion in vendor equivalency, but then again its free, isn't it.
No Corporation is GUARUNTEED JACK SHIT when it comes to earnings, and no amount of argument will ever convince me of this otherwise.
cost of the alternative (Score:3, Insightful)
Costing == Saving (Score:3, Insightful)
But consider therefore, that it's saving customers 60 billion and possibly a lot more (less costly for customers to maintain license compliance etc).
Re:Broken Window Fallacy (Score:3, Insightful)
Because the glazier makes out well, people assume the economy is healthy.
However, their customers would have spent the money elsewhere if their windows were intact, spreading the wealth further and encouraging more creation.
Because Microsoft makes money, people assume the economy is healthy.
Microsoft, like the glazier, fixes the apparent problem (lack of w/Windows) but because it's a tax on computer usage, tends to slow down adoption and thus the economy.
FOSS really is more efficient. If you need Apache, why rewrite it? Non-software companies want a website to do things with, not for the sake of the website. Having a cheaper website (not having to buy Windows + IIS) means less waste. Either more profit, or lower prices.
Sometimes you want Atlas rockets, or Lamborghini, and the rarity of your solution means a commercial vendor is the best choice in the area. But you've got more money to spend with them because you aren't paying a fortune for the little stuff anymore.
I think the two work well together. FOSS so nobody reinvents wheels, and businesses to write unpopular code.
Re:It's all in the spin... (Score:4, Insightful)
The wealthiest participants were determined to break the natural function of a marketplace to protect their own interests, and managed through their success to drive most of the talent into the "white market" of non-purchase goods, where at least some shelter exists from strong-arm market manipulation.
I tend to refer to this kind of financial post hoc as an "entitlement benchmark".
"If things had continued to go as we rigged them to go, maximizing our own benefit with no foresight or consideration for unintended effects, and the peons we squashed had remained powerless to get uppity about this state of affairs, we would have enjoyed another $60b/year in revenues by now."
Well, good for you. Aren't you the same geniuses who collapsed the Grand Banks fisheries, and pumped the Ogallala aquifer dry?
http://en.wikipedia.org/wiki/Ogallala_Aquifer [wikipedia.org]
Maybe its a good think that markets don't travel in the straight lines these projections presume.
If there hadn't been any alternatives, the Edsel would have been one of the best sellers of all time. What would that prove? Only that you can paint a goose red, white, and blue, and capitalists among us will still wring its neck to upgrade from wealth into shameful excess.
Re:Broken Window Fallacy doesn't apply (Score:5, Insightful)
Thats silly (Score:3, Insightful)
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.
Re:It's all in the spin... (Score:2, Insightful)
Of course it is. In slashdot-libertarian fantasy land, that is.
Back in reality, which of these conversations seems more plausible?
Hey boss, I figured out how to reduce our cost per widget from £50 to £40.
Great! Those are retailing at, what, £100?
Yup.
Marvellous. Send out the order - new price, £90!
Hey boss, I figured out how to reduce our cost per widget from £50 to £40.
Great! Those are retailing at, what, £100?
Yup.
Marvellous. An extra £10 profit per unit! Tell my secretary bring in that sports car brochure on your way out, my poor Ferrari is looking a little lonely in my luxury mansion's garage.
Yeah, exactly.
Re:Broken Window Fallacy (Score:4, Insightful)
Free Software is just a reflection of the economic reality that creating ideas is more valuable than duplicating them.
Re:and M$ is a vandal. (Score:5, Insightful)
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.
In other news... (Score:3, Insightful)
$10b db market ... in price maybe, not value (Score:3, Insightful)
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 $10b in value, only in price for a short time until the unsustainable price created competition that brought the market down to its true value.
Oh, i'm wittering here now and someone who's studied finance and business will shoot me down anyway.
Re:It's all in the spin... (Score:3, Insightful)
Re:Broken Window Fallacy (Score:2, Insightful)
Eventually when open source nano tech programs can build houses from molecular scratch, everybody will be saved the time of having to work for and pay off a mortgage for 30 years to have a roof over their head, even though construction workers and construction companies will be put out of business.
But this is in no uncertain terms creation of economic wealth. And it also serves to wholly cut out the extra inefficiency of the taxman's cut. This is a *huge* competitive advantage to open source. No shipping costs. No tax costs.
Oh, it applies. (Score:3, Insightful)
In this story, the proprietary vendors are the glaziers. The glazier may indeed lose business, but it is no cost to the economy as a whole, and it is a benefit to the shopkeeper, who can now spend money on things other than software.
Re:Broken Window Fallacy doesn't apply (Score:2, Insightful)
I'd go even further than that, and suggest that open source doesn't necessarily take away from software vendors, but allows more users access to software that they normally wouldn't pay for. When I see software labeled 'Free Trial' next to one labeled 'Free', I almost always go with the latter. But then again maybe I'm just cheap.
Re:and M$ is a vandal. (Score:2, Insightful)
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.
Hubris (Score:3, Insightful)
Free software only costs developers (Score:2, Insightful)
OSS saving vendors money too (Score:2, Insightful)
$60 billion? That's nothing! (Score:3, Insightful)
Re:and M$ is a vandal. (Score:3, Insightful)
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.
Re:FACT: Open sauce is communism !! (Score:5, Insightful)
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$'s profits are in reality other companies losses, let alone the 10 to 100 times hundreds factor of using their software even after you have paid for it (well it actually never stop paying for it until you finally crossgrade/upgrade to open source software and start making those billions of dollars of savings ;D).
Re:and M$ is a vandal. (Score:3, Insightful)
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 [hrsmart.com] salary [ubuntu.com] doing [taleo.net] this just like at proprietary vendors. You must be reading the Microsoft FUD [microsoft.com]. 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)