Study Finds "Free Open Source Software Is Costing Vendors $60 Billion"

I am trying to get my hands on this new report from the Standish Group that says that open source is decimating the traditional software market.

Open Source software is raising havoc throughout the software market. It is the ultimate in disruptive technology, and while to it is only 6% of estimated trillion dollars IT budgeted annually, it represents a real loss of $60 billion in annual revenues to software companies," said Jim Johnson, Chairman, The Standish Group International, Boston, MA

If the $60 billion is true (and I would assume based on Standish's five years of research it is) then we have been dramatically underestimating the impact open source is having on the traditional vendors. We've known there is a effect, and now we finally have some numbers (and $60 billion is a whopper.)

MySQL Marten Mickos has often spoken of "taking a $10 billion market and making it a $3 billion market." If you consider that open source has taken out $60 billion of traditional software revenues there will be a bloodletting in the proprietary world soon enough.

It's a great time to be an open source company.

While lost revenue is maybe a bad thing for those companies losing it. Are the customers able to tackle more problems because they can stretch their dollar (peso, euro, yen) further? That is what I want to know.

[daverosenberg]

Yes, open source lets your stretch your dollars because you are getting more for less money with no upfront license fee.

[wruz6]

Do you think the $60 billion figure is accurate?

[daverosenberg]

Not sure yet. I am waiting for the report

[SomeRichGuy]

Why yes! Just yesterday I didn't spend $60 billion on software!

[martin_opatrny]

I think these are two things, each one has its own virtues. It is not easy to compare, it depends on your preferences. Judge yourself.

With proprietary software, you pay and you get served. It has worked very well until recently. Some big companies prefer to engage in crushing the competition by all means, preventing illegal copying and getting over 90% of the market and they do not care much what their customers need.

With open software (or free software or whichever) you get the software for nothing and you pay with your own time. At least this has been my experience with Linux software. Some companies can save a lot of money if they build up internal expertise. Plus you get much more choice and freedom. This is becoming more and more important due to the monopolist trends in proprietary software.

So with open software, some people will be loosing their jobs, but I think that at the bottom line, all of us will profit.

[MrMBDR]

They could have titled this as: "Free Open Source Software Is Saving IT
Business Customers $60 Billion", but I guess negative headlines more
catchy. To me this research can be spun either way, good or bad. As for
the "loses" for the vendors, maybe they should add a department that
provides support for these free open source software, and make money off
that. It's really a matter of shifting the revenue from one source to
another. Jobs lost in one area are gained in another. Anyway I think the
world economy is large enough for both proprietary and open source,
there will always be be customers for both.

[martin_opatrny]

To droebuck54:

Exactly. I agree. It is just a matter of what people prefer. What you gain at one place you loose at another. Anyway, by having both proprietary and open software you gain more choice. So far so good. But I am worried about some long-term trends. Have a look at this:

http://www.articleonramp.com/Article.cfm?ID=24564
Will Linux die in 2018?
By Simone Brunozzi.

According to Simone, everything which has been said here will become irrelevant by 2018. Because by that time you will not be able to buy a computing device with which you can do anything you want. Regardless of the existence or nonexistence of open software. Due to the law restrictions and the combined power of Hollywood, music and media industry etc. There will be no open hardware. Restrictions will be built into firmware. You may not even be allowed to build such a free device without restrictions by yourself. According to law.

[AndrewTheArt]

I see very few actual disadvantages to using certain open source software packages, such as Red Hat and the like, simply because the only real cost is time, support, or a good balance of the two. The cost of this mix of time and support is arguably less than that of proprietary solutions. Also, having the freedom and flexibility to choose whether you'll manage the product yourself and look up solutions online, and the like, is a good thing indeed.

[PRJohn58]

This is called competition, which most of the free world participates in. If a cheaper model of development has proved successful then this should be a consideration for many companies in the future. It would be interesting to know what turnover open source has contributed to the companies involved, after all open source is not necessarily free.

[DrFaust]

At the end of the day, quality matters. It isn't cheap, for instance, to run Red Hat in a production environment, given the fairly steep Red Hat support costs. But as a server in a production data center, Red Hat is a very quality solution. So for that matter is Solaris. Last time I checked, Solaris support was significantly less expensive than Red Hat (Red Hat Standard $1,499, Red Hat Premium $2,499 vs. Solaris Basic $324, Solaris Standard for x86 two sockets $720, Solaris Premium for x86 two sockets $1,080). Again though, quality matters. The debate on which OS to pick usually isn't about cost, it's about which OS is perceived to be "best" for the problem at hand.

[srobtjones]

Licensing fees may be less, but this fails to account for the time costs. After all, time is money, especially when workers are paid hourly or projects are billed hourly.

It seems nobody can accurately quantify the time costs of either open source or proprietary software. Therefore, these types of reports are suspect, unless a company can provide year to year budgetary data.

[zwheel]

Wow, $1,000 just to read a report. And I suppose a report about how proprietary software vendors are losing money to open source is full of valuable information a company can use to make that money back right? LOL. Are these reports priced by the same people whom determine the price of the proprietary software that is losing out?

I wonder how well written the report is? i suppose the ultimate test would be if it is written so poorly that someone is actually willing to do the work themselves, releasing it for free, just so they can get a report that actually satisfies their needs. I mean... how bad is your product when someone would rather build from scratch, for free, than use it?

Maybe if proprietary software companies had listened to their users, created stable products with the users people wanted and priced them within reason, oh, say... starting 10 to 15 years ago things would have never progressed this way.

Also... who wants to bet... they are estimating how much OSS is in use and making the assumption that each bit of it represents a piece of expensive software that someone would have purchased had they not had the option to use a better, free program. As if every piece of software in use is one that couldn't be done without. I'd like to know, though not enough to pay $1000.