Monday, August 15, 2011

Open source is not free (as in beer) ...

Last week, I took the time to ridicule a post at the PBBI blog on open source, which really boiled down to a critique of the very flimsy open source argument "open source is free (as in beer) so it's a budget panacea!". I hope not many open source advocates are retailing that one, but I'm sure one or two of us still are.

In my idealistic younger days I read a lot of Chomsky, and one of the general principles I took away from him is the idea that as citizens we have a duty to critique and criticize our own governments first and foremost. Beating our chests about the behaviour of some despot on the other side of an ocean might be cathartic, but if we're really interested in improving the commonweal it is our job as citizens of democratic societies to make our own governments better first. (Like, why does Canada sell asbestos as a building supply to third world countries when back home we recognize that it's too dangerous for our own buildings?)

Anyhow, in that spirit, it is really my responsibility, not PBBI's, to point out the disingenuousness of "open source is free (as in beer)" as a slogan.

So, first the counterargument.

I think most folks recognize that implementation costs will wash out software acquisition costs for any moderately complex system build. But we still, in our lizard brains, feel like the acquisition cost of proprietary software has to be a systemic problem. Perhaps because it's so painful at a personal level to whip out the credit card and plunk down a few hundred bucks for something like Microsoft Office.

However, when you examine the numbers, it gets very clear very fast that service costs are an order of magnitude larger than software acquisition costs. The BC Public Accounts tell the story for my home province: For the past ten years, ESRI has taken in between $1M and $2M a year pretty consistently selling GIS software. Over those same years, the consulting companies in town I would call "geospatial companies" have in aggregate billed about 10 times that annual figure providing services.

Services rule! The profit margins in services are notoriously lower than for software, and I'm sure ESRI made more pure profit on their $1M per year. But the bulk size of service revenues more than compensates. That's why IBM and HP are growing into services. Because there's so much room to grow in there.

Second, the refinement.

While "open source is free (as in beer)!" can be oversold, it is not actually untrue. Open source does actually have a price-tag of $0, and proprietary has a price-tag of > $0. So how to refine the slogan to not over-emphasize price? I have been using a modification which I hope focusses people more clearly on where the price can be important.

"Open source has a zero dollar capital cost."

So, given that the cost of services out-weighs software for most system building, you might not care about software acquisition cost if you're deploying the finished product once. But if you're deploying a system across 10 or 100 nodes, then the capital cost of deployment might be an extremely important economic variable.

In some cases (*cough* Oracle *cough*) the cost of just one node can be enough to push people over the edge on initial capital cost. But most proprietary software is more moderately priced, and it takes more nodes before the pure price differential is worth feeding into a comparison exercise.

I lay out more non-monetary reasons for bringing open source to the management table in my talk A Manager's Guide to Open Source.

1 comment:

Unknown said...

Why does Canada sell asbestos overseas? And why does the US require tobacco companies to put warning labels on their products sold here, but not overseas? Are customers from other countries a lower life form whose health is unimportant? Good thing polluted air observes national boundaries!

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