In the 1990s, open source was generally viewed as experimental approach to software development mostly used by research and academic communities on emerging projects like the Internet and Linux. Open source has since evolved to become a well-accepted model of economic production across just about all private- and public-sector communities around the world. But, while widely used, what’s been the economic impact of open source on nations and firms? This question was addressed in a recent study on the impact of open source on the European economy.
“The increasing relevance of Open Source (OS) during the last two decades requires an update of an in-depth analysis of its current role, position and its potential for the European economy,” said the European Commission (EC) in its report on The impact of open source software and hardware on technological independence, competitiveness and innovation in the EU economy.
“Whereas Open Source Software (OSS) has become mainstream across all sectors of the software industry during the past 20 years, Open Source Hardware (OSH) is still in an emerging phase. However, the business ecosystem for OSH is developing.”
The EC conducted a comprehensive analysis of the commercial uses, costs, and benefits of OSS and OSH. “On the basis of this information, the study assesses the potential for the European Union (EU) to achieve its policy goals (including economic growth, greater competitiveness, innovation, and job creation) through the use, promotion and support of OSS and OSH.”
The report includes a detailed, quantitative cost-benefit analysis of the economic impact of open source investments; a survey on the views of over 900 stakeholders; a number of concrete case studies; and several public policy recommendations to the EC and the EU members countries. Let me summarize each of these areas.
Cost-Benefit Analysis
“Based on public domain information, companies located in the EU invested some €1 billion in OSS in 2018.” The report explained how it arrived at this estimate. In 2018, there were at least 260,000 OSS contributors to GitHub out of more than 3.1 million software developers in EU countries. These OSS contributors made more that 30 million commits to Github, which represents a personnel investment of around 16,000 full-time equivalents (FTE). Based on average EU personnel costs, 16,000 FTEs represents and investment of €1 billion.
“Econometric time series analysis of EU Member State GDP data indicates that in 2018, across all Member States, the economic impact of OSS was between €65 and €95 billion.” Based on its analysis, the study estimated that an increase of 10% in OSS contributions would generate an additional EU GDP per year of between 0.4% and 0.6%. In 2018, the EU GDP was €15,900 billion, so a GDP increase of 0.4% - 0.6% corresponds to an increase of €65 - €95 billion.
“Overall, the benefits of Open Source greatly outweigh the costs associated with it.” According to the study, in 2018 “the contribution of OSS to EU GDP, and contributions of EU employees to OSS, yield a cost-benefit ratio of slightly above 1:10. After taking into account hardware and other capital costs of the 260,000 EU contributors to OSS, the cost-benefit ratio is still slightly above 1:4.”
The methodology underlying this cost-benefit analysis is explained in great detail in the EC report.
Survey Insights
In addition to the quantitative analysis, the study conducted a survey to gather and analyze the views of EU stakeholders on the impact of OSS and OSH. The survey received responses from over 900 companies and developers. Most respondents were involved in OSS as users, developers or providers of services, with only a small number involved in OSH development.
The survey showed that the top motivations for being involved in open source were finding technical solutions, avoiding vendor lock-in, advancing the state of the art of technology, developing high quality code, and seeking and creating knowledge. Other motivations included cost-savings, lowering internal maintenance efforts, access to royalty-free code, and increasing returns on R&D investments.
In addition, the survey found that individuals were motivated by their personal interests in contributing code to OSS communities. Individual survey respondents said that the highest benefits of working with OSS groups were supporting open standards and interoperability, improved access to source code, independence from proprietary software providers, access to a highly knowledgeable and active community, and enhanced security and quality.
Case Studies
To address the lack of data in some areas, in particular on OSH, the study conducted a number of interviews. These were distilled into a several detailed case studies, including:
- Maker to Manufacturer Process Innovation. OSH projects like Arduino, MyriadRF, and RepRap bring together academia and the maker movement and provide a bridge between citizen manufacturing and industry.
- Open Hardware Computing & Infrastructure. OSH success stories like RISC-V and SiFive provide a platform for innovation and commercial exploitation.
- Embedded Systems & IoT. OSH projects like OpenCompute, CentOS and Yocto help developers embed general purpose computers into physical devices from smartphones to cars using off-the-shelf hardware and freely licensed software.
Policy Recommendations
Based on its overall analyses, the study made a number of recommendations to the European Commission. These include:
- Building Institutional Capacity. Create and fund a network of up to 20 Open Source Project Offices to support and accelerate the consumption, creation, and application of open technologies.
- Creation of Legitimacy. Integrate OSS and its communities into European research and innovation policies, as well as into European industrial strategy; engage with OSSH foundations that may offer a suitable approach for funding and support.
- Strategic Intelligence. Expand the Open Source Observatory - a place where the OSS community comes together to learn about events, find relevant open source software solutions, and read about the use of free and open source in public administrations across and beyond Europe; and integrate Open Source in the data collection activities of Eurostat.
- Knowledge Creation. Increase R&D funding related to OSS and OSH projects through existing programs like Horizon Europe, and new initiatives aimed at SMEs startups, and individual developers; and offer research awards and prizes for OSS and OSH communities, students, and professors.
- Knowledge Diffusion and Networking. Support the development and maintenance of OSSH platforms and depositories; and provide strong incentives for uploading code generated in publicly funded R&D projects.
- Entrepreneurial Activities. Provide entrepreneurial skills on OSS and OSH based start-ups with financial support from OSSH foundations.
- Market Creation. Consider Open Source explicitly in competition and platform policies relating to the governance of open source communities.
- Human Capital Development. Promote Open Source education, - including development, business models, licensing, and management, - in higher education institutions; offer certification licenses to individuals with OSSH skills; and support research projects to increase the diversity of contributors.
- Financial Capital Development. Treat OSSH contributions from individuals and corporations as charitable donations for tax purposes; and launch financial instruments like focused VC funds to help OSSH startups to team up with established companies.
- Regulatory Environment. Promote OSS as a major channel of knowledge and technology transfer; improve the inclusion of OSS in public procurements; consider Open Source in future revisions of European copyright and patent legislation; and fund security audits of critical OSS projects.
Open Source Software is already having a large impact on the EU economy, and the potential of Open Source Hardware is beginning to emerge. A comprehensive and coordinated approach to public policy is needed to further scale and incentivize Open Source productions for the benefit of the European economy.
Heads up: "the top motivations for being involved in open source were finding technical solutions, avoiding vendor lock-in, advancing the state of the art of technology, developing high quality code, and seeking and creating knowledge"
I know the text of the report may appear to say that, but it is not true. I have a fuller understanding of the scope of the surveys that have been done in the field. Please reach out to me if you are interested.
Posted by: Lawrence | March 18, 2022 at 12:42 PM