Open Source: A Capitalistic Value Engine

Preface

This book offers a comprehensive analysis of how open source can benefit companies through the interconnected concepts of value capture and value generation. It highlights the strategic and financial advantages of open source within a capitalist free market, providing readers with a foundational understanding of how to leverage these benefits in their businesses.

The book illustrates that open source is not just a space for socially or ethically minded enthusiasts who seek to challenge corporate dominance or contribute back to the society that has nurtured them. Instead, it demonstrates that open source is also a significant driver of innovation and wealth creation for free market enterprises. Furthermore, the book shows how social responsibility and economic growth are deeply interconnected.

The book explores the historical context behind the shift of computer software from being a community-driven tool to a commercially protected asset in the mid-1970s. This transition led to two liberalist movements: BSD on the US West Coast and Free Software on the US East Coast. While both movements leveraged copyright law to remove overly paternalistic software restrictions, the Free Software movement, led by Richard Stallman, primarily positioned this as a means to liberate software for the public good. Yet, regardless of any moral or societal overtones attached to these actions, both movements repurposed copyright, a concept rooted in capitalism dating back to the early 18th century, to promote a more open, market-driven and collaborative innovation model. A model that has benefited both humanistic and capitalistic innovation at ever-increasing rates.

The book discusses the various practical implications of open source for companies, including revenue generation, reducing vendor lock-in, and enabling market disruption. It also emphasises how open source fosters a culture of innovation and knowledge sharing, inspiring companies to attract, train, and retain rare developer talents. Furthermore, this book delves into how companies can benefit from the open source community’s collective expertise to accelerate technological advancement and create innovative solutions that meet evolving market demands.

In summary, this book positions open source as a strategic asset for companies. It underscores the potential of open source to enhance a company’s overall competitiveness, offering a forward-thinking perspective. By highlighting its power for value capture and generation, this book aims to inspire companies to embrace open source as a crucial element of their success rather than considering it as an easy way to avoid software license fees or, inversely, as a devaluation risk of company IP and effort.

Finally, this book aims to answer the many people who looked at me with a raised eyebrow and asked how open source makes sense for companies that want to make money.

1. Why Giving Stuff Away Makes Business Sense

People often ask me why companies introduce an open source dynamic into their modus operandi and how they can justify this choice to shareholders, business partners or anyone else who has a stake in the company's well-being. They wonder how a strategy that involves giving things away for free in an idealistic orgy of philanthropy can make any rational sense in today's generally neoliberal capitalist world.

This question is compelling because while capitalism and the pursuit of profit are often criticised for their impact on society and the environment, it's also essential to recognise that the incentives and opportunities provided by capitalism have also nurtured the role open source plays in collaborative-driven innovation and the positive impacts such innovation has had on society. Furthermore, open source is increasingly recognised as a means to extend hardware’s functional use case and longevity in pursuing a more sustainable digital future. This has a nice (if somewhat idealistic) circularity to it:

Capitalist-encouraged consumerism is generally seen as detrimental to the environment;

Yet, capitalism also supports community-driven open source collaboration;

Open source collaboration births many (if not most) of the innovations that shape and advance today’s digital society¹;

Open source has the potential to enhance hardware longevity by allowing users to repurpose old hardware;

Hardware reuse helps reduce some of the negative environmental impacts of consumerism as part of a broader circular economy [113].

Before delving into the concrete reasons companies adopt and justify using an open source dynamic (hint: because it advances business strategy), let’s briefly examine the origins and early drivers of open source.

1.1. It all started with free software

In the '60s and '70s, when companies even thought about software, they generally viewed it as an enabler of community-driven utility that helped sell hardware; they rarely viewed it as something that could be commercialised. And even when they weren't actively encouraging university researchers or the so-called hacker/modder communities of the day, they were at least not trying to block them.

In fact, beyond organically generating market demand, these different user communities provided valuable feedback to the manufacturers to help push hardware capabilities forward through a bi-directional dynamic of exploration and sharing. Computer software was a loss leader, creating a buzz but no revenue, while hardware was the gravy train.

This symbiotic stance started to radically change in the mid-70s. Driven by stagflation and the 1970s capitalism crisis,