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Programming Software The Almighty Buck Linux IT Technology

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."
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Free Open Source Software Is Costing Vendors $60 Billion?

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  • "Revenue" (Score:5, Interesting)

    by ookabooka ( 731013 ) on Monday April 21, 2008 @11:49AM (#23145118)
    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?
  • pathetic (Score:4, Interesting)

    by Anonymous Coward on Monday April 21, 2008 @11:50AM (#23145144)
    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.

  • by Anonymous Coward on Monday April 21, 2008 @11:51AM (#23145174)
    Shouldn't it read: "Free Open Source Software Is Saving Consumers $60 Billion"?...
  • by xxxJonBoyxxx ( 565205 ) on Monday April 21, 2008 @11:53AM (#23145224)
    Partial dup? Wasn't the $60B debunked yesterday? Anyway, as a software vendor that depends on MySQL, I think this "open source is cool" story was just put out there by Sun's PR team to deflect attention away from their accidental "even more of MySQL will be pay-to-play" in the future announcement. Hey MySQL, thanks for the help getting my product to market, but now it's time for some vendor independence; buh-bye.
  • by russotto ( 537200 ) on Monday April 21, 2008 @11:54AM (#23145246) Journal
    It's not quite a broken-window fallacy. Yes, if the money had to be spent on proprietary software, it wouldn't have been spent on other things, but that's still good for the software companies. A spate of broken windows doesn't help the economy as a whole, but it may help the glazier who repairs them.
  • And how much...? (Score:4, Interesting)

    by OpenSourced ( 323149 ) on Monday April 21, 2008 @12:04PM (#23145500) Journal
    Has anybody done an study on how much is generating for the users. Of course we have those same 60 billions saved. But I mean not only by direct savings in licenses, but by novel uses in places where licensed software would be uneconomical, new business that could not have been created otherwise, etc.
  • by eldepeche ( 854916 ) on Monday April 21, 2008 @12:04PM (#23145506)
    ...which would be the entire point of the broken window fallacy: Looking at the benefits to the party getting paid without realizing the opportunity cost to those who do the paying.
  • Another Fallacy (Score:5, Interesting)

    by w3woody ( 44457 ) on Monday April 21, 2008 @12:06PM (#23145546) Homepage
    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?
  • Re:New Math (Score:5, Interesting)

    by erroneus ( 253617 ) on Monday April 21, 2008 @12:09PM (#23145608) Homepage
    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."
  • by tgatliff ( 311583 ) on Monday April 21, 2008 @12:13PM (#23145688)
    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. :)
  • by Anonymous Coward on Monday April 21, 2008 @12:19PM (#23145816)
    You're absolutely right. But I think a better question is the following: how much of that newly available extra money is going into software? If the answer is "not much", it's possible that free software is slowing progress in software while transferring that value somewhere else.
  • The Fallacy Fallacy (Score:5, Interesting)

    by fm6 ( 162816 ) on Monday April 21, 2008 @12:20PM (#23145848) Homepage Journal
    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.
  • DANGER! CAR ANALOGY! (Score:4, Interesting)

    by iainl ( 136759 ) on Monday April 21, 2008 @12:39PM (#23146278)
    Suggesting I didn't buy an enterprise Oracle license because I installed MySQL isn't just a Broken Window Fallacy. For the tiny purpose I needed it for, it's more like suggesting that because nobody has written my Peugeot off, Ferrari are out of pocket the price of a 612 Scaglietti.
  • by willyhill ( 965620 ) <`moc.liamg' `ta' `kaw8rp'> on Monday April 21, 2008 @12:40PM (#23146322) Homepage Journal
    Is it safe to assume then that the business model of companies like RedHat, which is centered around providing support for the software they write and/or aggregate is also a form of this "vandalism" you claim "M$" is guilty of? After all, if my livelyhood depends on fixing problems with my code, what incentive do I have to ship it bug-free to begin with?

    In any case, Microsoft is hardly the only commercial software vendor in the planet.

    By the way, seeing as you've stopped posting with your other four sockpuppet accounts, I'd appreciate a response to my post [slashdot.org] if you have some time.

  • Re:"Revenue" (Score:3, Interesting)

    by immcintosh ( 1089551 ) <slashdot&ianmcintosh,org> on Monday April 21, 2008 @12:40PM (#23146326) Homepage

    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.
    To be fair, I think that's a much safer assumption in this case than it is for music. Music is a luxury good, while word processors (and most other open source software) aren't.

    That said, all this latest round of petty bitching really amounts to is, "People are spending money on other goods and resources, when they clearly should be spending it on us!" There are a lot of people out there who simply can't seem to cope with software-as-product becoming a thing of the past. The future of software is pretty clearly turning into software-as-service (just take a look at the license to print money that World of Warcraft has turned into).
  • by Znork ( 31774 ) on Monday April 21, 2008 @12:55PM (#23146652)
    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.
  • by unlametheweak ( 1102159 ) on Monday April 21, 2008 @01:15PM (#23147050)

    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.
    I think you are confusing amortization with actual economic loss. Of course anybody can always choose to destroy property (or even burn money), but this is a tangent to the overall argument. If you buy a faulty product then this may, overall, lead to loss but this is not inherently a 'loss' (you are gaining a faulty product after all. Deal with it.)

    I do sympathize with your arguments.

    Best regards,

    UTW
  • ONLY SIXTY BILLION? (Score:3, Interesting)

    by Jeremiah Cornelius ( 137 ) * on Monday April 21, 2008 @01:16PM (#23147062) Homepage Journal
    C'mon people! Get your game in gear, and triple this figure!
  • by ADRA ( 37398 ) on Monday April 21, 2008 @01:37PM (#23147484)
    The way I read the article, "taking a $10 billion market and making it a $3 billion market" means that the conglomeration and altruism of open source development models is 3.3 times more effective than traditional software development and excess revenues.

    Who can argue with that. Maybe that remaining 7 billion can be spent on curing cancer, or building a working fusion reactor instead of wastefully tossing it into an industry that apparently can't compete with 'inferior' offerings by open source purveyors.
  • by hasdikarlsam ( 414514 ) on Monday April 21, 2008 @02:26PM (#23148284)
    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.
  • by ACMENEWSLLC ( 940904 ) on Monday April 21, 2008 @02:30PM (#23148348) Homepage
    >>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 [zdnet.com]
  • by walterbyrd ( 182728 ) on Monday April 21, 2008 @03:36PM (#23149412)
    One the one hand, proprietary companies scoff at F/OSS, claiming that F/OSS market share is insignificant. On the other hand, proprietary companies claim F/OSS is killing their revenue stream.

    Which is it?
  • Well then... (Score:3, Interesting)

    by msauve ( 701917 ) on Monday April 21, 2008 @04:34PM (#23150326)
    "open source has saved businesses over $60 billion in expense compared to traditional software, and created a new multi-billion dollar support industry."

    That wasn't hard, was it?
  • by mr_mischief ( 456295 ) on Monday April 21, 2008 @05:28PM (#23151124) Journal
    Trickle down economics works in some situations, but not all. Some company like Southwest Airlines or Intel employs a lot of people and makes their goods and services much less expensive than small companies ever could. It's good for the people needing the jobs, it's good for the people wanting the goods or services who couldn't afford them otherwise, and it's much more efficient to attack problems of scale with scale.

    OTOH, we have companies like Starbucks and Yum! Brands that give us monotonous flavor from sea to shining sea in lots of little locations. Markets like that would probably be better served by locally owned restaurants, but most Americans seem to like predictability.
  • by GigaHurtsMyRobot ( 1143329 ) on Monday April 21, 2008 @07:02PM (#23152288) Journal
    If you haven't agreed to pay them, it is not a loss. They can expect all they want but if you go elsewhere, they haven't lost anything... they just haven't gained anything either. Going out of business is not shameful, it happens when you've been bested. You can adapt and succeed, or you can fail.
  • I can go into any mcdonalds and be pretty damn sure I can get something that

    1: tastes reasonable, not the worlds nicest but perfectly acceptable.
    2: will fill me up
    3: comes at an acceptable price.
    4: won't give me food poisoning.

    Sure a local place may be better than mcdonalds, equally it may be terrible. When you are already tired and worn out and in an unfamiliar place do you really want to risk having to eat a horrible meal or spend yet more time and money going somewhere else?

  • by try_anything ( 880404 ) on Monday April 21, 2008 @08:51PM (#23153214)
    I'm responding to this old troll because it's the first mention of communism in the thread.

    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.

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