The Numbers

Even though there is some controversy on how and why Open Source and Free Software exist, one thing is certain: it's real, tangible and it's here to stay. The numbers are quite staggering when compared to traditional production models. For example, a popular Open Source community “SourceForge.Net” houses more than 150 thousand projects and more than 1.5 Million Programmers. The Debian distribution of Linux (one of the many Linux distributions) is counted with every new version and it's cost estimated with the COCOMO methodology; the size of Debian 4 (Etch) is about 282,995,227 millions of lines of code and would require around 43 years with approximately 2500 dedicated developers and a total cost of $259,594,800,000, with a salary of $56,286 per developer per year, and a 2.4 overhead factor.

One might ask why would people around the world develop a public domain free software system that is valued at 260 billion dollars, and do it for “free”? Well, in reality, the business of Open Source is no mystery. In fact, it's just as simple as any other service-oriented business or “commodity”. Open Source companies use the public domain software and adapt it to their customer's needs, providing continuous support and creating the same level of service you get with a common “software-product”, if not better. Open Source companies usually give back to the original public-domain sources and this investment is returned with greatly increased value over time by the community that supports that specific project. The general concept is basically that simple.

Nevertheless, Open Source Software Communities are actually quite complex and seem to act in a chaotic manner. Because the software is open and free for everyone, any individual, company or community can take over, and/or derive projects from the original. This creates fierce [wild] competition based solely on true value and not on the artificial advantages of patent and copyright. These characteristics are analogous to natural selections of the species and yields in a very rapid evolution of IT technology and better software.

So there it is. There are around 250 thousand software projects valued at hundreds of billions of dollars and it's all free. You can download, compile install and modify this software without paying anyone, anything. But there is a catch: you are still bound by the Copyright License of that software. So if for example, if you take the Linux Kernel (which is released on version 2.2 of the GNU-GPL license), and decide to make it private, that is, derive your own version and sell it as your own work, that's illegal and you may get sued by Linus Torvalds (and many others) for doing so. So the catch is that the majority of Free and Open Source licenses will restrict some rights, especially those that can make a derived work become closed source. There are of course, freer licenses than the GPL that allow for Open Source derived works to become private works, or be re-licensed as such, the BSD license is a good example. This allowed for Mac OSX, which is based on the Open Source Operating System: OpenBSD.

Show me the Money

So why are hundreds of billions of dollars out there as free and open technologies and who has financed them? This is probably the hardest question to answer, and that is because there is no simple (or single) answer. Every free and open source project is different, and their original authors had different motivations and funding resources. Many have come from taxpayer money through government and educational institutions. Some have been privately funded, and some have sparked out of purely community work on the Internet. Why people invest their time in Open Source development is very complex and it would take a whole book to explain it.

Nevertheless, to easily grasp the economical concept of Open Source: the money made at a local level is greater than the money spent in investment in the public good. In other words, for every cent you invest in the public domain software you may get a dollar back in a short time frame. The production model revolves around the "Community" which is explained below:

The Community

An Open Source project revolves around a "Community". This term might sound like some ideal form of homesteading, and although it actually is so, it's simpler to grasp when you understand the actual people behind the project and their particular motivations. Although communities vary in size and shape, the following diagram illustrates the "standard" community model that is present in many of today's successful Open Source Project:

Final Users

On the very surface, you have the final users, people who probably just download and use the software because it's free and legal. These users, organize themselves in forums, mailing lists and other sorts of self-help, or they sometimes will seek the help of service providers that may offer paid support and services. These paid service offerings may come from any level in the community, but usually from the integrators or well-established service providers.

Integrators and Service Providers

This second level is mostly in it for the money, but usually has a “community” side to his business as well. The integrators generally understand the value of the public good and the overall community, so they will tend to actively contribute to them. A service provider at this level is usually involved with many more than one project or community.

Contributing Community

The motivation for this layer is harder to understand. Sometimes it may be composed of one or several large clients that use the software, or service providers that are focused to that particular project or technology. They may offer stable packaging and distribution of FOSS, being RedHat Linux a notable example.

Medullar Community

This level is very close to the nucleus of the project. They are sometimes motivated by the fact they will be the heirs once the nucleus actors move away from the project, or are motivated by other factors, such as social status, curriculum, etc. They may be in charge of maintaining the resources around the project, such as the project Web site, version control systems, etc. These are many times the people that come to mind when you speak about the “community” around a Free and Open Source project.

Nucleus

These are the original authors or current maintainers of the project. Their motivations vary vastly as well. They may be there for curriculum only, or they may offer services directly around their public good. Final users will tend to ask the nucleus actors for help, figuring they would be the most apt to offer such support. Being small in number, these will many times refer the users to other parties, or may not answer final users at all.

Conclusions

When a company develops a solution to a local client using Open Source, they will surely have to modify and enhance the original source, and it's cheaper for them to release their enhancements to the original project than to maintain their enhancements in future versions of the original project. After they release their enhancement, it will most probably be enhanced by other people in the same situation, not only saving in maintenance costs, but also effectively creating a rapid return on investment for the original contributor. This model is difficult to understand from a traditional perspective on the means of production, where a company may have hundreds or thousands of direct employees. In Open Source, every user is potentially a contributor, so the numbers scale sometimes to dozens of millions of potential “developers” (note 1).

This is a new model of distributed development of IT technology where the costs of the value chain are reduced to practically the direct investment of the final user who is paying for the final service. Overhead costs are greatly reduced or completely removed (sales, distribution, support), so it makes the model very competitive against other traditional means of non-distributed development. Actually these distributed modes of production are not new, but the Internet has taken this concept to a whole new level, shortening the distance between producers and consumers, in fact, changing the very concept of client and customer (note 2).

Notes:

1. Developing a software product requires market studies, design and actual coding. Open Source users (with their freedoms) are more likely to participate in user forums and communities in any way they can. This might be as simple as submitting a bug or as complex as posting a patch or a complete new functionality. Good examples are: the Linux Kernel with a community of around 30 million strong, and the Firefox Web Browser, which has recuperated abut 30% of the lost market share of Netscape, in just a few years, for “free”.
2. Take for example, virtual market places (eBay, for example) where people buy and sell just about anything. In these cases it's hard to tell who is the supplier and who is the consumer.