Collaboration With Great Power: Unveiling the Strategic Nature of Open Source Software


Hatched by Glasp

Sep 08, 2023

4 min read


Collaboration With Great Power: Unveiling the Strategic Nature of Open Source Software

Open source software has become a powerful force in the technology industry, with many companies investing significant resources into its development. However, the motivations behind these investments may not be as idealistic as they seem. In fact, most companies see open source software as a sound business strategy rather than a sudden embrace of freedom-as-in-speech. This article will explore the strategic nature of open source software and its impact on the market.

One key concept to understand is the idea of substitutes and complements in the marketplace. A substitute is an alternative product that consumers may choose if the original product is too expensive. On the other hand, a complement is a product that is typically purchased alongside another product. For example, gas and cars are complements, as are computer hardware and operating systems. When the price of complements decreases, the demand for a product increases. This means that if computers become cheaper, more people will buy them, leading to increased demand for operating systems.

Economists consider the total price of a product, which includes intangible factors such as the time and effort required to set up and adapt existing processes. These factors, often referred to as the "total cost of ownership," need to be taken into account when evaluating the true cost of a product. In the case of open source software, proponents argue that it is free-as-in-beer, meaning it is available at no monetary cost. However, this argument fails to acknowledge the significant time and effort required to revise existing device drivers and ensure compatibility with different hardware. These efforts divert valuable programming talent from other open source projects, limiting their resources and potentially hindering their development.

Interestingly, many large public companies are investing heavily in open source software, employing teams of programmers to contribute to its development. This aligns with the principle of complements, as these companies understand that lowering the price of complements is in their strategic interest. By supporting open source software, they can commoditize enterprise software, making it more accessible and driving demand for their own products and services. For example, IBM, once primarily a hardware company, has transitioned into an IT consulting company. By commoditizing enterprise software through open source, they have gained a significant advantage in the consulting market.

Similarly, companies like Microsoft and AOL/Time Warner have pursued strategies to commoditize web browsers. Browsers and servers are classic complements, and by making browsers freely available, these companies can increase the demand for their respective products and services. This strategy also serves as a preemptive move to prevent any one company, such as Microsoft, from gaining a monopoly in the web browser market and potentially increasing the cost of web browsing through other means.

The difficulty in commoditizing software lies in the fact that hardware can more easily adapt to software through the use of abstraction layers. However, the reverse is not as straightforward. This is evident in the desktop office software market, where the switching cost for users remains significant, preventing true commoditization. As hardware prices decrease, the market expands, creating more demand for software and allowing for potentially higher prices.

In light of these observations, it becomes clear that collaboration is a powerful tool in the world of open source software. Companies strategically invest in open source projects to lower the price of complements and increase demand for their own products and services. This collaboration not only benefits the companies involved but also drives innovation and accessibility in the technology industry as a whole.

Actionable Advice:

  • 1. Embrace collaboration: Recognize the value of collaborating with other companies and developers in the open source community. By working together, you can lower the price of complements and create a more vibrant and accessible market.
  • 2. Prioritize resources: Understand that the availability of programming talent is limited, and each open source project competes for these resources. Focus on projects that have the potential to attract the most talent and make the greatest impact.
  • 3. Consider the long-term effects: When investing in open source software, think beyond immediate cost savings. Consider how commoditization can benefit your products and services in the long run and align your strategies accordingly.

In conclusion, open source software is not just about freedom and ideology. It is a strategic business decision for many companies, driven by the principle of complements. By commoditizing complements, companies can increase demand for their own products and services and create a more vibrant and accessible market. Collaboration and thoughtful resource allocation are essential in this endeavor, ensuring that open source projects can thrive and drive innovation in the technology industry.

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