What does it take to set a price on open source software (OSS), a resource so critical to the global economy that some 96 percent of commercial programs include some code created, modified, or freely distributed by public technical forums?
The new work presents an eyebrow-raising figure. Without open source software and their ubiquitous code-creation networks, companies would pay an estimated 3.5 times more to build the software and platforms that run their businesses, or roughly $8.8 trillion, say Harvard Business School assistant professor Frank Nagle and two colleagues.
The staggering scope of the findings could help value the work, so that senior executives and non-technical managers at companies understand how important hiring open source experts is to success. The results are among the first comprehensive figures to quantify how pervasive and integrated open source has become, highlighting that products are often the backbone on which many companies build their technology operations and the products they sell, Nagle says.
“To be able to say: ‘Look, this is not small anymore. This is very, very big. And it is very important. And this is the whole range of the economy itself,’ gives open source advocates—some of them embedded deep in IT departments trying to convince their superiors—ammunition that these things are valuable and that leaders should support them in any way they can,” Nagle explains. .
Measuring the impact of open source
Nagle co-authored the paper with Manuel Hoffmann, a postdoctoral fellow at Harvard’s Lab for Innovation Science (LISH) at Harvard’s Digital Data Design Institute, and Yanuo Zhou, a doctoral candidate at the University of Toronto.
To quantify the dollar value of OSS, the authors turned to two main sources: Census II of Free and Open Source Software, a joint project of the Linux Foundation and LISH published in 2022, and BuiltWith, a service that scans nearly 9 million company websites to understand how they are built, including what open source code they use. Only 18 code packages overlapped between the two sources, making the two data sets complementary.
Although they looked at all programming languages, they narrowed it down to the top five based on data from GitHub: C (including C# and C++), Java, JavaScript, Python, and Typescript. They also included the Go programming language.
To figure out how much it would cost to replace the free human labor behind open source platforms, the researchers calculated the estimated cost for an individual to recreate the software packages by measuring the number of lines of code. The team calculated how many hours it would take to write the code from scratch, using the COCOMO II model and salary data from Salary Expert to factor in global and regional differences in labor costs.
‘No one will believe this’
The authors say that their study is probably the most extensive to date on this topic. However, they warn that their findings could underestimate
value of open source software, in part because their study did not include operating systems, the part of the computer system that controls all other programs.
“When we first got the numbers in the trillions, we thought, ‘Nobody’s going to believe this,'” Nagle says. “But then when we started to dig a little bit more and think about the global demand for software and how much companies are already spending on software, combined with the fact that open source has become so prevalent in so many companies, whether they’re aware of it or not, then that huge figure began to seem more feasible.”
The $8.8 trillion figure represents the value of OSS on the demand side – if OSS didn’t exist at all and every company that used it had to rewrite that software from scratch. On the supply side, building those software packages would cost about $4.2 billion — if OSS existed, but all the most-used packages were deleted and needed to be rewritten, the study found. Furthermore, about 5 percent of developers are responsible for more than 90 percent of the value created for both supply and demand, Nagle adds.
Why open source is crucial for startups
Participation in open source is key to startups—and their ability to secure more funding, Nagle found in a separate study co-authored with HBS professor Shane Greenstein and Natalia Langburd Wright, an assistant professor at Columbia Business School. There, research shows that open source contributions drive entrepreneurial — and overall — economic growth around the world.
“We find a strong positive relationship between the contribution of OSS and entrepreneurial growth,” the authors write. “Higher quality companies are more likely to contribute to OSS, and OSS increases their subsequent performance.”
Translating OSS factors for your business
- For IT managers, knowing the value of OSS opens the door to talk with bosses about resources, Nagle says. “It gives IT managers a way to talk to their senior executives, to say, ‘look, we’re using all this stuff for free. And if it didn’t exist, we would be paying a lot more,” explains Nagle. “So we should spend at least a small portion of that on letting our people contribute to open source, especially projects that we rely heavily on.'”
- For executives, consider that there are often only one or two people in IT who understand the open source activities for a particular OSS project. But it can leave a company vulnerable, a realization that is slowly trickling down to upper management as companies consider hiring employees who will devote at least some of their time to OSS. “Boards need to think and understand that by using open source they save a lot of wasted costs,” Nagle says. “They also run the risk that one person run over by a bus can blow up an entire company.”
- For hiring managers, there is a clear rationale for hiring and retaining open source experts. “Companies are recognizing that there is value in hiring these people and then having them on their team and even paying them to spend some of their time doing what they love: working on open source and keeping open source,” Nagle says.
- For policy makers already focused on open source security, more attention needs to be paid to supporting the overall system, Nagle says. “As with many things in technology, the European Union is a bit ahead of the United States, but certainly the US is working more on open source and trying to support it,” says Nagle. “Recently, there have been efforts to get the government to use more open source as a cost-saving measure, and also to make it easier for government engineers to give back to open source in various ways.”
These results add significant weight to the arguments open source advocates have been making for years, Nagle says: Open source underpins the entire modern economy and has become an indispensable necessity for society to invest in.
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