Will Open Source Undermine The American Economy

This page quickly engendered a lot of discussion, not all of it on topic, and it could be a troll. Refactored, while attempting to neutrally present the points, and remove the vitriol. If there's a name still attached, that contribution hasn't been altered.

Microsoft's Jim Allchin made a presentation to the USA Congress arguing that OpenSource was a threat to the USA economy.

I thought this page was going to be about Microsoft's Jim Allchin whining to the USA Congress that OpenSource was a threat to the USA economy: "I'm an American; I believe in the American way. I worry if the goverment encourages open source, and I don't think we've done enough EducationOfPolicyMakers to understand the threat."

Well, maybe now it can be :-)

This is discussed in a "level-headed" article from the Economist Magazine:

http://economist.com/business/displayStory.cfm?Story_ID=620445

(The security issues that that article also discusses have been moved to OpenSourceIsMoreSecure)

The discussion rather assumes that OpenSource software is free, and that using ClosedSource means paying a licence fee. This refactoring also uses those (perhaps questionable) assumptions:

The question posed by the page title might be interpreted several ways:

1) Will OpenSource damage "the economy" generally?

There didn't seem to be much, if anything, about this.

2) Will OpenSource damage the American (USA) economy (instead of, or more than, other economies), because of characteristics peculiar to the USA economy?

3) Will OpenSource increase the competitiveness of other nations relative to the USA?

It is claimed that the questions might be significant because the American software industry is a key economic growth engine.

Other questions:

4) What about the effects on the non-software industry? 5) Won't it help the (US or general) economy?

Question 2)

Arguments for "yes":

Most software is not 'commodity software' - true. But an awful lot is. I'd say most of the software that is exported (from companies never mind countries) is commodity software. The US economy is more dependent on software than others. 0.5% (M$'s share? of exports - see statistics below) is a HUGE amount for one company!

Microsoft is one company, cited as an example, however being realistic it is all American software exporting companies, of which there are many. So the total effect is much larger than just M$.

Arguments for "no":

OpenSource is unlikely to wipe out the entire software industry, because it will have little impact on the non-commodity (and majority) part of the software industry. Most software traditionally is written within companies (or contracted to external development shops/contractors) for their own use. This is unlikely to change. Much other software is specialist, and so is unlikely to get a free version. Much software for which a free variant is available will still be bought from vendors with the experience and because of network effects of established standards.

Some people will still be prepared to pay for the support etc that comes with commercial software, even when a free substitute exists. Prices might drop, but commercial software development will continue

So the damage, if any, will be limited

Question 3)

Arguments for "yes":

Free software gives developing countries a big leg up in IT. No longer do they need spend big bucks to buy software. They can get perfectly good apps and OS's for free. Combined with their lower rates of pay it could give them a big ecomonic advantage. I read recently that Mexico was going down an OpenSource route to avoid paying for expensive licenses.

The reduced money coming into the USA because of the loss of those 'big bucks' means less capital available for investment in the USA, and available capital for investment in the US is a major factor in the competitiveness of the US economy

Those 'big bucks' are largely from commodity/standard software which is most vunerable to OpenSource substitutes

The amounts can be large: $100 for a Linux distrib and install on as many machines as you like - a whole server farm. Windows 2k server $2000 per CPU! It's easy to spend $100k+ very easily

Arguments for "no":

The costs/savings fall more or less equally on US and non-US companies, so it will have little effect on the overall economics.

Yes, licence costs can be large for some companies, but not enough to affect overall competitiveness.

Arguments for "maybe":

Much open-source software is written outside of the U.S. If U.S. companies deny themselves the benefits of this software, they certainly could find themselves at a comparative disadvantage.

Questions 4 / 5:

Arguments for 'yes':

OpenSourceSoftware is rapidly becoming the backbone of many fortune 1000 companies I have worked with. It is very appealing to their software developers because they can learn it at home or in classes and it appeals to management because its free. Think of the money that gets wasted in big companies just hemming and hawing about whether or not to use Microsoft or AIX, and all the bitter developers that hate both. With open source software you don't need giant commitees to review a global purchase contract, etc etc. You just hire the software engineers to evaluate the code for the business objects, prove the concept and away you go. It seems like a real win-win scenario to me. Companies that don't do open source will end up benefitting as well because they too can begin leveraging the work others are doing for their own work, even if they aren't using the source, but are simply using ideas developed in the open source environment. --TimBurns

''The real question is whether open source software will give the america (and other) economies a tremendous boost. Consider: getting rid of MicrosoftPowerPoint? and other ActivityWare? would by itself save billions in wasted productivity. How much would the american economy save by using an OS that doesn't crash and doesn't force them on a useless "upgrade" treadmill? The mind boggles. --AlainPicard''

Paying licence fees involves expenditure which can be difficult to get approval for in companies. Free software avoids this problem. With one company in particuliar that I work with, licenses have the added overhead cost that they have to go through a corporate review committee which adds tons of wasted meeting time to that license. The architecture teams are going with open source because they can push it through faster and it ends up costing lest in terms of people time as well.

Any company in the services business already has a lot of software engineers on staff. So there's little or no additional cost in using free software and doing the necessary software engineering work.

Arguments for 'no':

It's not clear that the mere presence of OpenSource software without those productivity tools will mean they stop being used. Can you imaging Andersens (oops, Accenture) giving up PowerPoint?

But then again you can buy a lot of licenses for the cost of a software engineer. The software is delivered today and you know it is much less likely to fail.

Some reported facts / statistics:

US GDP was US$9.3trn (1999). US exports were about US$2.4 trillion. MS revenue (2000) $22.96 billion, or less than 0.25% of GDP. Less than half M$ revenue comes from exports, so it's about 0.5% of US exports (but this isn't the same as the money coming to the US from M$ sales, because some stays in M$ subsidiaries)

The US invested more than US$148 bn overseas - never mind domestically, which will be much larger - in 2000.

Banks have loaned more than US$5trn currently in the US.

Software is not normally easy to identify in economic statistics.

Sources mentioned for statistics: finance.yahoo.com, www.fedstats.gov

One should, perhaps, beware government statistics (but some statistics seem needed)