Free OSS does benefit business - research

Read time 3min 10sec

Free open source software (OSS) does offer tangible productivity gains for businesses, but the quantum benefit depends largely on how large or small the company is, and the level of IT skills within the organisation.

That's according to Frank Nagle, Assistant Professor of Strategy at the Marshall School of Business at the University of Southern California. His research "Open Source Software and Firm Productivity" is the first to measure the impact of free OSS on productivity, particularly as OSS is increasingly being used as a key input by a growing number of businesses.

The study found that the impact on productivity from using free OSS was always positive or neutral - it was never negative. Every 1% increase in the use of free OSS can result in an additional $100 000 in profit. "For small firms, that's a huge amount of money while for larger firms, it might not be as significant," he says.

However, the impact for firms that don't have what Nagle terms an "ecosystem of complements" - particularly access to a corps of advanced and sophisticated IT skills to implement and maintain the software - could be much smaller, but is unlikely to be negative.

Nagle believes that this research indicates the fallacy of claims that free OSS does not deliver tangible productivity gains. It shows that IT giants such as Apple, Google, Facebook and even Microsoft, as well as non-IT organisations such as large automotive companies, made the right decision to adopt OSS to increase their innovative and productive efforts.

In addition, capital-constrained start-ups like WhatsApp, have been able to have what some consider a disproportionate impact, because of their almost exclusive reliance on OSS from their earliest days of their inception.

Nagle points out that more than 50% of firms now use or contribute to OSS, while the rise of mobile operating systems such as Android and iOS means that more than 50% of all computing devices are now based on OSS.

"When considering implementing new software, the allure of 'free' software can be great for budget-constrained businesses," he says. However, Nagle emphasises that the fact that the software is "free" does not mean that it comes without cost. It has been estimated that the purchase price of software represents less than 10% of the total costs that go into implementing, using and maintaining it.

In fact, there is research that shows that the long-term costs of "free" OSS are between 5% and 20% higher than those of proprietary closed-source software.

This is usually because of the fact that free OSS does not come with a service level agreement with a supplier as would be the case for non-free OSS or closed-source software. This, combined with the lack of development and support and security concerns can lead to users of free OSS spending unnecessary and unproductive time troubleshooting problems that may arise.

Nevertheless, Nagle says that the research shows that there are benefits for firms willing to take on these risks and costs: reduced upfront costs, collective intelligence of the grows, and greater flexibility to alter and enhance the code base - particularly if they have the necessary technical capabilities and complementary ecosystems to support the software.

Why you should develop code that your competitors can freely use

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