Towards Understanding Deploying Open Source Software:

A Study of Factors That Can Impact the Economics of an Organization.

Abstract

This purpose of this paper is to present the factors that can impact the decision to deploy Open Source Software (OSS) in an organization. Many organizations fail to understand the economics involved in using open-source software and consequently suffer poor results. An explanation of the Open Source Initiative (OSI), and a definition of Free / Libre Open Source Software (F/LOSS) is provided along with a discussion of the benefits and pitfalls of deployment in the context of the value chain. The results conclude that the benefits outweigh the risks and profit/benefit is possible if the economic impact is understood.

Towards Understanding Deploying Open Source Software

Without the technology that runs Information Systems (IS) most organizations would cease to function. The business model of a typical organization is tied to the systems and technology that it uses. Since the advent of e-commerce, and the market for products becoming nearly global, organizations are constantly looking for innovation in technology that will give them a competitive edge. A recent study pointed out that the advantage is temporary as other competing companies will copy or innovate even newer and cheaper technology which creates a perpetual requirement to adapt business processes (Ward and Peppard 2004). Open Source Software (OSS), if properly implemented, can become a key part of the innovation and adaptation of business organizations helping them to maintain a competitive edge.

Background

Ever since Porter (1996) introduced the Value Chain Analysis business concept in Harvard Business Review, consultants have tried to use the subsequent methodology to evaluate the quality of each link in the chain. A value chain is a series of tasks and interrelated activities performed by an organization to produce a product. As this product passes through each activity or “link” in the chain, where it is somehow refined, and the product takes on more value. The final sum of the value of all the refinement activity is more than the value that is created at each step in the chain. One way an organization might improve the quality of the links would be to use OSS in their Information Systems (IS).

There are many advantages to using OSS to improve the value of each link and the relationships between them. How IS is used by a company has a significant influence on the relationships between the activities in a value chain (Porter and Millar, 1985). IS helps a company to create and maintain competitiveness because competitiveness flows from creating value for the customer. The activities that create value for a company, such as purchasing, production and sales, are not independent but rely on each other in the value chain. Porter and Millar (1985), concluded that the proper use of information technology minimizes costs while maximizing value, optimizing value activities, and guaranteeing competitive advantages (p 151). These relationships between activities can be strengthened by good use of IS, and quality OSS to improve competition and create greater value.

The Open Source Initiative

According to the website About the Open Source Initiative (n.d.), The Open Source Initiative (OSI), was incorporated in 1998, and is a non-profit corporation who’s primary purpose is to provide education about Open Source Software (OSS) and to advocate for the benefits of OSS. The OSI also claims they exist to build bridges among the constituents of the open-source community. They further claim that one of their most important activities is to act as a standards body that maintains the definition of OSS. They also hold a trademark called The Open Source Initiative Approved Licensearound which they attempt to build a nexus of trust so that all parties involved can cooperate on the use of OSS.

Definition of F/LOSS

The definition of free/libre open source software (F/LOSS) is often misunderstood. The free part of the definition is about the liberty of use with the product and not about the price. The Free Software Foundation (2010) maintains the following definition:

“Free software” is a matter of liberty, not price. To understand the concept, you should think of “free” as in “free speech,” not as in “free beer.” Free software is a matter of the users’ freedom to run, copy, distribute, study, change and improve the software. More precisely, it means that the program’s users have the four essential freedoms:

• The freedom to run the program, for any purpose (freedom 0). The freedom to study how the program works, and change it to make it do what you wish (freedom 1). Access to the source code is a precondition for this.
  The freedom to redistribute copies so you can help your neighbor (freedom 2).
  The freedom to distribute copies of your modified versions to others (freedom 3). By doing this you can give the whole community a chance to benefit from your changes. Access to the source code is a precondition for this.

Embracing the Business Model

The decision to deploy OSS in an organization is difficult at best. The idea of embracing the Open Source Initiative (OSI) business model as a business strategy is even more frightening for organization executives. There are dissenting opinions on the value of using OSS from many directions that attempt to sway the decision for many reasons. Some reasons are based on misinformation, others are based in fallacious economic policies and others based in fear. Behlendorf (1999), explained that the OSI model is not for everyone, and it is often implemented incorrectly and then blamed for the failure. In fact, the failure is more often result of a poor understanding of how to embrace the model and deploy OSS than the OSS itself.

All or Nothing?

There are multiple ways to deploy OSS in an organization it is not an all-or-nothing approach. For example a school might decide to deploy open-source office suite, such as Open Office, in place of the commonly used Microsoft Office. Another example might be a commercial company decides to use a module of OSS code to provide functionality in a product or as a value add-on to an existing proprietary product. For example, the company Objectweb had several products that embed OSS components. In the most extreme example, a company might decide to open the source code of one of their products to try and create a competitive advantage and gain market share. One of the most well known examples of this move is the Netscape corporation who opened the source to their web browser Mozilla. Each of the methods of deploying OSS share some economic impact commonalities that need to be considered before making the move to OSS.

The implementation of OSS, if properly understood, can be a reliable asset in the value chain. One of the biggest hurdles to overcome is the idea that the source code, once kept secret and valued as the company profit maker is now opened and shared, even with competitors, to produce a better product. In a recent study showed that if a company decides to open the source code to a product, they will often have greater profit if they have a complimentary product that the OSS application enhances. This allows the company to exploit the benefits of combining the open and closed products (Haruvy, Sethi and Zhou, 2008). In a related study the authors explained that not all code has to be shared, those pieces that differentiate and make the organization competitive can be kept and sold separately (Behlendorf, 1999). Instead allowing the core code to be open and shared allows for innovation that can strengthen and enhance the product and provide new paths for innovation.

The Symbiosis

There is a symbiotic relationship between an organization the chooses to use OSS and the OSI community. When the two work together well, success is likely. In a recent study there were four factors that defined the most successful projects. The findings showed that projects that did well had the following characteristics: (1) a solid core developer group, (2) an active peripheral group in communication, (3) a high level of communication exemplified by a depth of threaded communications and (4) only moderate dependence on the internal community for beta testing. The research finds a direct correlation and predictability in the level of communication and the code development within the project (Vir Singh, Fan, and Tan, 2007). This means that if these qualities are shared between an organization choosing to deploy and use OSS then there is more of a chance for success. There are many examples of companies that have successfully opened their source code and created a symbiotic relationship with the OSI community.

The Mozilla Example

Organizations, even commercial firms, can benefit from opening their source code. One possible benefit is to gain ground against a competitor. In a research study Lerner and Tirole (2005), explained how Netscape in 1998 decided to open the source code of a portion of it’s browser “Mozilla”. At that time Internet Explorer was dominating the browser market and Netscape was only holding a tiny share. The study further showed how the web browser application became more accepted, and by opening this source code, Netscape experienced a market share and profit increase. This means it is possible for an organization to remain commercial, open the source code and make a profit. When the point of the OSI is understood, there is great value in the process.

The Value In Using F/LOSS

About ten years ago OSS was relegated to the role of operating system (Linux) and web server (Apache). Now OSS is firmly in the middle layer providing databases (MySQL, Postgresql) and Email servers (Qmail, Horde) among many other functions. OSS has two very distinct properties: the source code is accessible and the developer has the liberty to modify the code any way they want and redistribute pieces of it or the entire source code (Thomas and Hunt, 2004). This is important, particularly to the OSI community, because access to the source, and the liberty to reuse it, creates the opportunity to use existing software as a launching point to create new products based on new designs. This gives the developer access to high quality source code readily available with a few mouse clicks in a web browser. The liberty to use the code as desired and the availability of the source code removes several boundaries that exist when attempting to reuse code. A developer may choose to use a few lines of code, an entire class or an entire system (Frakes and Terry, 1996). This means the reuse of the source code has several advantages including the ability to break out of a lock in with a specific vendor, produce high quality products, get the product to market quicker, and foster innovation which adds value and increases customer satisfaction.

OSS is developed by many groups, often spread out globally. Most often the initial creation of the software program is done to fulfill a need by a single group of developers at one company or school. This group will release the code to the public before it is completed, usually to help spur further development. Perens (2005) explained that other companies may pick up this code and extend or adapt it to their use. This means new features and functionality can be added or adapted as needed by the organization that chooses to use OSS. The code is often of very high quality and developers are offered incentives to write high quality code.

The Quality of the Code

One common objection to using OSS as part of the IS in an organization’s strategic portfolio is the quality of the source code. Quality, in this instance, is defined as well-designed, well-written, relatively error free and functional. There are two major influences on the quality of open-source code that drive the level of quality in an open-source project. Gacek and Arief (2004), explained that the structure of an OSI development community is based most closely on a meritocracy. The better the quality of the code written, the more merit the developer has within the community. Perens (2005) explained that the developers who modify OSS code have an incentive to write the code well so that their changes get incorporated into the main body of the code. That way they don’t have to spend money to re-integrate their changes into the existing code base every time they want to implement an update. The value of a meritocracy is that a developer has incentive to write quality code and to become a respected member of the community. These incentives help to promote high quality, well written code in the OSS projects.

Some argue that the quality of the OSS code is so good, it is unfair to compare it to proprietary or closed source projects. McConnell (1999), stated that successful OSI projects should not be compared to regular closed source projects and instead should be compared with software development effectiveness as it is achieved by companies on the leading edge using multiple practices to achieve high quality software. This means the quality should be compared based on the methodologies used by the companies to determine if within the methodology, the quality of the code is equal. Golden (2008) commissioned a case study by Coverity, a company that tests software quality, and found that OSS programs averaged half the number of the bugs per thousand lines of code when compared to proprietary programs (p. 36). This study shows the quality of OSS code, when compared to equivalent proprietary programs is superior.

Breaking Vendor Lock-In

One aspect of OSS that can present an opportunity to create a competitive advantage is the ability to modify the source to meet the organization’s business model. A recent study showed that a major strategy used by software vendors is to keep the cost of switching to another product high by implementing proprietary data formats and keeping tight access on the source code (Carillo and Okili, 2008). When an expensive proprietary product is purchased for use in a company, Castelluccio (2008), explained the product often becomes “sticky” or “locked-in” either because management wants to earn a positive return on the investment or because the cost of switching would be excessively high. For example, the data storage format could lack interoperability with other vendor’s software preventing import and export of information. These concerns can also be accompanied by the inability to fix bugs in a timely manor or get the vendor to respond quickly to the organization’s need. Golden (2008) showed one of the primary reasons organizations are adopting OSS is because it includes the source code, the organization is free to strip out unneeded functions and make repairs themselves thus eliminating dependence on the vendor. The study further showed that because no single vendor controls OSS so the organization is free to pick a different provider to support their program. For the organization this means the liberty to make the changes they need, customize the software to fit their business model, which in turn, will help increase value of individual links within the value chain and increase a competitive advantage.

Quicker To Market

Using OSS can provide a competitive advantage especially when it is used in the development of new applications. According to a research study by Ajila and Wu (2007), there is a strong correlation between the ability to get product to market sooner and the adoption of OSS, thus providing economic gains in both productivity and product quality. As long as the source code meets that needs of the project, the implementation of code into a project will shorten the development time. That means by adding OSS to a project the development time can be shortened, the cost to develop decreased and the time to market reduced. These factors can give an organization an advantage and the ability to strengthen the bond in the value chain and thus add value to the product.

Innovation

Innovation is truly a key part of the OSI movement. The ability to reuse existing code and create something new is vital to the success of an organization. Vujovic and Ulhøi (2008), explained that the model known as open innovation, now seen in a global market, allows for greater innovation in product research and development. Companies’ ability to stay competitive is no longer exclusively determined by efficient cost management and marketing capabilities. Rather, it relies increasingly on the continuous development of new and superior products and services in a business environment characterized by growing instability (with regard to consumer preferences and technology development). A recent study found that within a three year period a small core of developers, assisted by a transitory group of less committed developers were able to create several new products using existing OSS from sourceforge. The ability to use the code gave them a measurable advantage in creating applications (David and Rullani, 2008). This means the competitive edge has to come from a wider body of developers and researchers and with such strong competition in a global market, using the OSI model, where innovation happens across a wide community, will help an organization stay competitive.

The Pitfalls

There are many ways to use OSS improperly. When choosing to deploy OSS to increase or create a competitive advantage, there are just as many ways to implement the project improperly as there are to create success. Before an organization decides to incorporate a single line of OSS code into a project, or to open their source to the world, there are some concerns that bear a sober review.

No Reliable Release Schedule

The OSI community does not employ the same controls for release schedules like a commercial application. According to a recent study the level of control exerted on an OSS development project is much lower that a commercial counterpart and thus have a less reliable release schedule. Only the most active and highly used projects, such as Apache, have reliable release schedules (Capra, Francalanci, and Merlo 2006). This means the release schedules are not exact and may not deliver as planned. If an organization is counting on the deployment of a certain OSS project, there is a risk that the project might not deliver what is planned or promised as they do not exert the same type of control of release dates.

The Developer Skill Set

The developers who will implement OSS in an organization do not need special skills, but do need an understanding of OSS and how to reuse source code properly. A recent study showed that while there is no strong statistical significance between OSS reuse skill and experience, and software development economics, there is some statistical correlation pointing to the fact that software reuse experience and skill in general is important when reusing OSS (Ajila and Wu, 2007). That means it is important that the developers engaged in the process have at least a general understanding of code reuse and some familiarity with OSS before attempting to do an integration. Otherwise failure and cost overruns from a lack of preparation are likely.

Ideology Over Pragmatism

Although OSS offers many benefits it does not fit in all situations and a clear pragmatic perspective is required because relying only on the ideology can lead to missing out on possibly better solutions. OSS often makes it’s way into a company through developers who work on projects. Their mindset towards OSS can be ideological and prevent them from considering alternatives. According to a study by Ven and Verelst (2008), if the mindset of the developer is ideological in reference to OSS, their decision will not be pragmatic but instead they will have a strong preference for using OSS, without properly considering proprietary alternatives. Suitability of the OSS solution is sometimes overlooked and in the organization-specific context, and new innovations might be ignored. This means the developers, who are often the decision makers about what products to use might instead use an OSS solution that does not fit as well because they are adverse to considering proprietary solutions or do not properly consider all alternatives and find the best fit.

Maintenance

Another pitfall to deploying OSS within an organization is failure to create the symbiotic relationship with the OSI community. An organization could chose to download, modify and deploy OSS solutions within their value chain to gain a competitive advantage. According to Dahlander (2004), some organizations stop at this point and for a time, enjoy the benefit of using high quality code for free in their primary or secondary value chain activities. This however, is a short sighted plan and only a short term gain is realized as there is still cost associated as problems arise when the need for updates and upgrades appears. The organization may attempt to go back to the project where they acquired the source code only to find the project discontinued or morphed into something different that is far from meeting their needs. The modifications made to the original OSS code should be returned to the community so that they are incorporated into the code base, thus helping to maintain a symbiosis. The maintenance of the OSS code is equally important as the value gained from the low price. This means an organization should take the time to create the relationship with the OSI community and not focus solely on the short term gain realized by inserting free source code into their value chain.

Legal Issues

One important part of using OSS in a product that is distributed outside the organization is to preserve the intellectual property rights of the people who worked hard to create the software. When choosing to reuse OSS or incorporate the code into a product that is distributed outside the organization credit must be given to the original developer and the source code must be made available or the organization would be in violation of the license given with OSS. According to research performed by Walsh and Tibbets (2010), infringing a registered copyright carries with it the risk of statutory damages, injunction against shipping products incorporating the OSS, and possibly other penalties; some may find this a surprising consequence of using “free” software. That means misunderstanding the license that comes with OSS can have detrimental effects upon an organization. Use of the software is provided as long as the organization complies with the terms of the license.

Benefits Outweigh The Risks

The choice of an organization to integrate OSS into the application portfolio is not a simple task. The choice to distribute OSS as part of a product can lead to legal issues if the license assigned to the code is not fully understood. The benefits, though mixed, overall outweigh the risks according to the research offered in this paper. If an organization understands the risks and benefits of deploying OSS, and follows a systematic model for the implementation and reuse of code, there is a good chance they will achieve some economic gain from a shorter development cycle and equally important, a high quality product.

Further Study

A future project to add to this study could be a qualitative study involving several interviews with executives, mangers and developers to provide insight into the intent of each group and help understand how each of the aforementioned factors impacted each group’s decision to participating in an OSS project. Another possible project to add to to this study could be a quantifiable survey of executives, mangers and developers to provide an analysis and predictability of success based on the level of understanding of each of the aforementioned factors that impact the decisions to deploy OSS.

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