In a recent article, I explored how challenging it can be to capture the economic value of the digital economy, and that traditional metrics, such as GDP, may be under-representing the contribution digital goods, which are often free, bring to the economy.
Nowhere is this more evident than with open source software, where much of the economic value is not captured in the price people pay to use it, yet it’s estimated that 96% of commercial programs have at least some open source code that was distributed for free online.
Capturing the value
A recent study from Harvard Business School suggests that if such value was effectively captured, it would come to a whopping $8.8 trillion. The researchers believe that putting a value on open source work can not only help from a macroeconomic perspective but also in terms of helping managers understand the value open source expertise provides to firm success.
To measure how much Open Source Software (OSS) is worth in dollars, the researchers looked at two main sources: Census II of Free and Open Source Software, which was a project by the Linux Foundation and LISH released in 2022, and BuiltWith, a service that checks about 9 million company websites to see what open source code they use. Only 18 code packages were found in both sources, so they used both sets of data together.
They studied all programming languages but focused on the top five based on data from GitHub: C (including C# and C++), Java, JavaScript, Python, and Typescript, plus Go.
To figure out how much it would cost to pay people to recreate the open source software from scratch, they counted how many lines of code each program had. Then, they used a model called COCOMO II and wage information from Salary Expert to figure out how many hours it would take and how much it would cost, taking into account differences in labor costs worldwide.
A conservative estimate
While the researchers argue that their work is the most comprehensive analysis of open source’s impact, they have likely underestimated the true value open source software brings, not least because they excluded operating systems from their analysis.
Nonetheless, the figure of nearly $9 trillion underlines how important open source is, as without it, companies would have to invest such a vast sum to replace its functionality. This could be especially problematic for startups, who the researchers found were particularly reliant on open source. Indeed, in a separate study, the researchers found that open source played a crucial role in entrepreneurial activity, both by utilizing open source software but also contributing to it.
From a managerial perspective, the authors hope that their work gives IT managers a better way of talking about the value open source brings. This helps IT managers talk to their bosses and explain, “Hey, we’re using all this software for free. If it wasn’t available, we’d have to pay a ton more. So maybe we should allocate some of those savings to let our team contribute to open source, especially the projects we heavily depend on.”
A fresh appreciation
By being able to put a dollar value on open source, the researchers believe that senior leaders will gain a renewed appreciation of the value open source can bring to the organization. This extends to being open to employees actively contributing to open source projects, even on company time.
“Boards have to be thinking and understanding that by using open source, they’re saving lost lots of costs,” the researchers explain. “They’re also exposing themselves to the risk that a single person getting run over by a bus may blow up the whole company.”
Being active in open source communities can also help with regard to the recruitment of talent. Businesses are realizing the worth of hiring individuals who are passionate about open source and dedicating part of their time to it. They see the value in having these experts on their team and are willing to pay them to contribute to and maintain open source projects.
While open source advocates have long championed the sector in terms of its ability to underpin the modern economy, the researchers believe that their findings should help the rest of society catch up with this line of thinking. Far from being a nice to have, it’s an irreplaceable necessity that we can’t do without.
