Economic implications

• What are the economic benefits and detriments of developing open source system?

Only 30% of software is sold while the rest is created directly for customers and only the developers are paid for their service, not the software. Although at first glance, it may seem that open source software would not be sustainable because the software is not being sold, the real economic benefit of software is not a result of software sales. The economic implications of software is of any kind of software is a result of the secondary economic effect of software which results from enabling other businesses to improve efficiency and profits through the use of software as a tool. Therefore, regardless of open source or closed source, the tool itself affects great many businesses which results in economic benefits. Open source may be a benefit over closed source because open source allows programmers to freely create innovative software (aside from licenses) without the constraints of needing to create popular software for profits. This innovation may help businesses improve their operations, thereby improving the overall economy. On the other hand, many argue that open source would produce lower quality and less innovative products which would be to the detriment of the economy.

http://perens.com/Articles/Economic.html

• What are the factors that influence companies’ decision whether to use open source application?

Once seen as flaky, cheap and the work of amateur developers, open source has emerged blinking into the daylight. With unrestricted access to the source code to run or modify at will, and support coming from an ad hoc collection of software developers and fellow users, the open-source model is very different from proprietary software. But it is nevertheless proving attractive enough for a host of CIOs to make the switch. So who's using open source? Why are they using it? And are the benefits worth the risks? The answers are surprising—and dispel some of the myths surrounding open source.

Myth 1: The attraction is the price tag One of open source's most touted benefits is its price. Download the software, install it—and don't pay a penny. That's the theory. But to a surprising number of open-source user companies, the price tag—or lack of one—is irrelevant. What companies that are using open source find fascinating is the performance improvement that resulted (e.g. decrease in the rate of server failure experienced by the company, running applications faster, etc.).

Myth 2 - The savings aren't real Open-source software has been described as "free, as in a free puppy." And yes, the absence of software licensing fees needs to be offset along with the costs of training, support and maintenance. On the other hand, proponents of open source also cite reduced costs of "vendor churn," where vendors require users to migrate to a new version or pay for extra support. Most users we spoke to for this story reported a net savings with open source—often a substantial one. The big attraction of open source is that there's a zero marginal cost of scale because open source doesn't require additional licenses as an installation grows. As a result, the cost per transaction plummets as more are added to the systems.

Myth 3 - There's no support According to Gary Hein, an analyst with technology consultancy Burton Group, technical support is a potential open-source user's primary concern. "Who do you call when things go wrong? You can't wring a vendor's neck when there's no vendor," he says.

In practice, the situation is complex. As Hein points out, most open-source projects have a large corps of developers, Internet mailing lists, archives and support databases—all available at no cost. That's the good news. The not-so-good news is that there's no single source of information. "A simple question may result in multiple, conflicting answers with no authoritative source," he says.

Even so, says Klaus Weidner, a senior consultant with technology consultancy Atsec, multiple sources of support can be better than being tied to one vendor—especially when that vendor provides bad support or refuses to continue supporting software of a certain vintage.

In practice, existing users of open-source software appear perfectly happy with open-source support arrangements. "The breadth of resources available for open-source applications is so great worldwide that we can get support, communicate with a developer or download a patch no matter the time of day," says Thomas Jinneman, IT director of RightNow Technologies, an ASP that hosts customer service products for more than 1,000 companies worldwide, including British Airways, Cisco Systems and Nikon.

Myth 4 - It's a legal minefield A variety of open-source licenses exist, and helping CIOs understand their implications is good business for lawyers—very good business. "[CIOs'] concerns chiefly revolve around the implications of using code to which they can't verify their right to use," says Jeff Norman, a partner in the intellectual property practice of law firm Kirkland & Ellis. "Just because you've got a piece of paper saying that you own the Brooklyn Bridge, it doesn't mean that you actually own it."

For some users, third-party indemnification is an option. On Nov. 17, 2003, for example, JBoss Group announced it will indemnify and defend JBoss customers from legal action alleging JBoss copyright or patent infringement. Other vendors of open-source software—including HP, Red Hat and Novell—also offer indemnifications of varying types.

Myth 5 - Open source isn't for mission-critical applications Mission-critical applications don't come any more crucial than those in banking, where transaction systems simply have to work, period. Experimenting with open source, with its attendant risks in terms of potential infringement, security and maintenance, might be regarded as anathema. "Banks tend to be conservative institutions—first followers, if you like, rather than leaders," says Clive Whincup, CIO of Italian bank Banca Popolare di Milano, who freely admits that the bank's venture into open source was the result of "some fairly lateral thinking."

But walk into Banca Popolare's smart new branch on the Via Savona in Milan's Zona Solari district, and the service these days is much faster than customers have previously experienced. The reason? Unwilling to throw out the bank's legacy banking applications, totaling some 90 million lines of Cobol, but unable to keep them running under IBM's vintage OS/2 Presentation Manager operating system, Whincup has used a proprietary legacy integration tool from Jacada to connect the Cobol to IBM's WebSphere—running in a Linux partition on the bank's mainframe.

The result: Formerly disjointed applications now run slickly in a Web browser, yielding faster transaction times, less time spent training tellers—and many more opportunities for cross-selling the bank's services.

The bottom line Is open source right for every organization?

Companies with an external focus, which are used to working collaboratively with other organizations, and perhaps are already using collaborative technologies, stand to gain much more from open source than companies with an internal focus, which see the technology in terms of cost savings. As the past decade has shown, standardization with a proprietary flavor—think Microsoft—has its drawbacks: bloatware, security loopholes, eye-popping license fees and an unsettling reliance upon a single vendor. In offices around the globe, an era of open-source standardization, determined to condemn such drawbacks to history, may be dawning.

http://www.cio.com/archive/030104/open.html

• How does society influence creation of software?

Countries and municipalities frequently consider policies to favor open source technologies over proprietary choices. Main resons for doing so is that open source presents opportunities to countries that are growing their ICT infrastructure because it is often a low-cost software choice (and free, at least in its simple form) and can foster a local technology development community rather than sending license streams to large technology companies in other countries.