Creating wealth with free software

Creating wealth with free software

A report by the Standish Group indicates that adoption of 'open source' has caused a drop in revenue to the proprietary software industry by about $60 billion per year. That's not a huge amount of money compared to what has been lost though the misselling of mortgages, but it is still a lot. The report identifies the value of these 'open source' products to be about 6% of the world market for software. Unfortunately, the Standish Group doesn't believe in openly sharing its research, instead selling it for $1,000...

In an ideal world, we could presume that the companies that are not spending this money on proprietary software are spending it wisely. I would be worried, however, that senior decision makers will not understand the cost savings possible in IT at the moment. Thinking about an IT department in a large organisation, it is unlikely that the management are going to want to reduce their spending, as this will make them less important... and we can assume that managers don't want this. It will be much easier to stick to the proprietary route and keep spending money.

Now is the time, for those suited to it, to get out into the corporate world and explain to the most senior management the cost savings that can be achieved through using free software. That will mean that the squeeze will be put on IT departments to come up with more sustainable plans for their purchasing. This will create more demand for free software consultants and paid posts for free software programmers and experts.

I have held for a long time that the free software ethos means that you should be making money out of what you are doing, not what you have done. If this research group can sell a piece of paper of $1,000, maybe we can make a bit of money out of consulting.



mpschroeder's picture

I was in this very situation trying to explain this to a senior IT member.. it was really hard work.

Terry Hancock's picture

The report identifies the value of these ‘open source’ products to be about 6% of the world market for software

This number isn't very useful unless you know how they arrived at it, or to whom they meant this value to apply.

Are they saying that the $60 billion loss was 6% of the total? Or are they saying that the open source industry earns about 6% of the total of the proprietary software industry.

The economics gets dicey because the costs of IT are severely artificially inflated due to proprietary monopoly tactics. Thus, when you introduce a free market (i.e. open source), the "value" plummets (which is what it should do when the artificial props are removed).

(If we're actually spending $1 trillion a year on IT budgets, then I'm betting we're paying way too much!)

The money to be made from free software is a lot less than the money made from proprietary software, but that's as it should be: free software more closely approximates a free market, so competition means lower prices. Things should stabilize at a sustainable level, but it will mean much smaller IT budgets! So it won't be good from everyone's PoV.

Author information

Richard Rothwell's picture


I'm a director of M6-IT CIC. We are a Community Interest Company in the UK dedicated to deploying and supporting the use of free software in the third and education sectors.

I'm chair of Schoolforge UK, an organisation dedicated to promoting the use of free and open source software and resources in UK schools. I taught computing in UK schools for over 20 years before moving to providing solutions.