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Wednesday, February 27, 2008

Is Open Source Software Necessarily Cheaper?

Bill Gates, in a famous open letter to hobbyists in 1976, argued that the software shouldn't be available for free (gratis), because if it were then no one would like to develop software, quality software anymore:

Why is this? As the majority of hobbyists must be aware, most of you steal your software. Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid?

Is this fair? One thing you don't do by stealing software is get back at MITS for some problem you may have had. MITS doesn't make money selling software. The royalty paid to us, the manual, the tape and the overhead make it a break-even operation. One thing you do do is prevent good software from being written. Who can afford to do professional work for nothing? What hobbyist can put 3-man years into programming, finding all bugs, documenting his product and distribute for free? The fact is, no one besides us has invested a lot of money in hobby software. We have written 6800 BASIC, and are writing 8080 APL and 6800 APL, but there is very little incentive to make this software available to hobbyists. Most directly, the thing you do is theft.

His logic was, and is still sound: very few of us can do something for our own interest, with total disregard for our own economics needs. We feel good if we work on a product that we love and give it away for free, and those who are lucky enough to get our gifts will be grateful to us for making their lives a little better ( at no charge!). But we need to eat, we need to pay our bills, we need to feed our kids and we need to prove to the world that we are somebody useful. Classical economics will suggest that without economical incentives there is little point in writing good, quality, easy-to-use software.

But with the advent of open source concepts, particularly with the rise of open source software such as Linux Operating System and Mozilla Firefox web browser, this theory is put to test. Some really outstanding open source software are on par of proprietary software in terms of quality. Linux OS is said to be more stable than Microsoft's Windows, and the Microsoft's Internet Explorer is definitely no match for Firefox in terms of stability, security, extensibility and user friendliness. Who said quality software can't be produced by enthusiastic, part-time programmers who are not motivated by monetary rewards!

The success of some open source software proves that there is such a free lunch after all.

And so we see that open source software is promoted as a viable alternative proprietary products, and as a protest against the monopolistic power in software world. IBM scrambled to allied itself with Linux in order to break the Microsoft dominance on Operating System; MySQL is promoted over the MS SQL because it is free and open source. The experience of working with open source projects becomes a shining point in the developer's resume.

Open source software is mostly free, which is why it is so popular. Business exists to make money. If you can save a hefty sum of license fees by simply just switching to open source software, then why not do it?

I think here lies a subtle point that a lot of people tend to-- either conveniently or inconveniently-- overlook: Open source software is not necessarily cheaper, even though you don't have to pay for the tools.

That's right, open source software is not necessarily cheaper. There are hidden costs that are not reported on the book.

First, there is a switching cost if your company is using proprietary software and now you want to switch to open source software. You need to retrain your staffs and redeploy new applications, all of them takes money.

Second, although the open source advocates seldom mention it, but most open source software have a learning curve and require personnel support. Guess what, the big software vendors who promote open source tools rely on that to make money. In order for them to make money, it is necessary that the tools itself are not user friendly so that there is a need to let expert guys to help the average users out. The more money made from support, the more expensive the open source software is.

Third, what about the time taken to learn or use the software? Time is money. Would you rather cling to your open source dogma and let your developers use the free SharpDevelop for C# development instead of the "expensive" Visual Studio 2008? With Visual Studio 2008 comes a lot of plug-ins which, when used properly, will increase drastically the programmers' productivity. Yes, a lot of the plug-ins, such as Visual Assist X, Resharper, TestDriven.Net do command license fees. But I can safely say that the development cost is cheaper if I were to develop in Visual Studio with plug-ins then in SharpDevelop.

Now, don't get me wrong. I don't say that Open Source Software is necessarily more expensive. What I am trying to say is that there are times when going for proprietary software makes a lot more business sense than going for open source solution.


6 comments:

Michael Sync said...

very good points..

Soon Hui said...

Thanks, michael

commons_guy said...

Your overall premise -- that the total cost of an open source solution may be higher than commercial counterparts -- is sound. However, some of the particulars of your piece cast unnecessary aspersions on open source.

At the high level, most of what you describe as the additional costs are one-time expenses (e.g., installation, bulk training). The nice thing about one-time expenses is that you only pay them, well, once. Some commercial software also only has a one-time expense -- the initial purchase. But other pieces of commercial software require ongoing cash outlays, either due to the delivery model (e.g., salesforce.com and software-as-a-service) or due to the pricing model (e.g., must pay annual subscription for tech support rather than a per-incident fee). If you want to do a real dollars-and-cents analysis, you need to measure total expected outlays over a period of time, not just up-front costs.

Now, to the specifics:

"First, there is a switching cost if your company is using proprietary software and now you want to switch to open source software."

False. There is a switching cost if your company is using software and now you want to switch to some other software for the same purpose. Proprietary vs. open source has nothing to do with it. The only "savings" here is if you don't switch. If you need to switch (e.g., what you are using is no longer available, or won't run on Vista, or something), then all alternatives will have switching costs, and you need to estimate the amounts and compare them.

"Second, although the open source advocates seldom mention it, but most open source software have a learning curve and require personnel support."

False. Although most bloggers seldom mention it, most software has a learning curve and requires personnel support. Proprietary vs. open source has nothing to do with it. It's not like people are born with intrinsic knowledge of the use of proprietary software and need to have electro-shock therapy to get them retrained for open source equivalents. I've seen people struggle using Microsoft Word, for example; those people would struggle just as much with OpenOffice.org Writer. Assuming that "it's proprietary, therefore we don't need to give people training" is nonsense.

"In order for them to make money, it is necessary that the tools itself are not user friendly so that there is a need to let expert guys to help the average users out."

And your proof of this conspiracy is...what, exactly?

I don't doubt for an instant that open source packages, on average, have less documentation and online help than do their commercial counterparts. However, attributing this to malice requires proof.

Soon Hui said...

commons_guy, thank you for your response.

I agree with your points mostly. But maybe we have a mis-communication here.

False. There is a switching cost if your company is using software and now you want to switch to some other software for the same purpose. Proprietary vs. open source has nothing to do with it. The only "savings" here is if you don't switch. If you need to switch (e.g., what you are using is no longer available, or won't run on Vista, or something), then all alternatives will have switching costs, and you need to estimate the amounts and compare them.
True, but my point was directed to those who wanted to move from commercial software to open source software because open source is free.

Of course all alternative takes money, if you want to switch. I didn't pretend that commercial software required no switching cost. And that includes open source software, but I have seen people preaching open source software as if it is something totally free. I wished to correct this misunderstanding.


False. Although most bloggers seldom mention it, most software has a learning curve and requires personnel support. Proprietary vs. open source has nothing to do with it. It's not like people are born with intrinsic knowledge of the use of proprietary software and need to have electro-shock therapy to get them retrained for open source equivalents. I've seen people struggle using Microsoft Word, for example; those people would struggle just as much with OpenOffice.org Writer. Assuming that "it's proprietary, therefore we don't need to give people training" is nonsense.


Yup, I know that. But again, commercial software's cost for technical support is always visible. But open source's cost is not. I tried to make it a point that open source do have a cost.

And your proof of this conspiracy is...what, exactly?
No, I don't have a proof. But then I need not to provide one, because I am not accusing anyone of engaging in this practice.

But my point is just a corollary of the whole support-as-revenue business model. I mean, if you cannot earn money from your software, but can only earn money from the support you provided with the software, do you still have the incentive to make your software user friendly?

Steve said...

I'm a big fan and a little (very little) contributor to open source but i must agree that TCO for use or switch to open source is NOT ZERO!

---
I've seen people struggle using Microsoft Word, for example; those people would struggle just as much with OpenOffice.org Writer.
---

As i can see in italy there's a lot of people that can manage to use M$ Word but are unable or scarry to use or try OpenOffice simply because it's different from the "Standard" M$ Office...

Then there's managment... they don't mind about MySql or postgres or whatever... thery're interested in "safe" decision.

For Example i see dual 8 Gig oracle server to run a 500 mb or so database....

In the end a lot of Open Source project have a Commercial countepart... u can have mysql for free but U have to pay for support... where is the hidden cost??

Also... i see a LOT of less than user friendly commercial product.. while in the open source there's a "Darwinian" model... if the project is good gain traction/user/developers... if is not... then will be abandoned...

Sorry for the english!

Christopher Keene said...

Open source software trades of cost for time - if you are willing to invest some of your own time, you can save a lot of cost.

For developers at the bottom of the IT food chain, getting budget for new technologies is next to impossible, so there is a high willingness to invest personal time to avoid procurement hell.

The value prop of open source is not low cost per se, but the ability to put new technologies to the test at low cost.

I wrote more about this on my blog under the heading The Silverado Rules for Open Source Success