The impact of open source on business and social good

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Two different paths to different outcomes

I vividly remember the time when my early opinions about open source software were built around questions that made natural (and perfect) sense to me at that point in my life, like: "Why would someone sell a software product for free?" and "Why should anyone participate in a project that does not reap financial rewards?" These formed the basis of my rationale.

That was before I embarked on my professional journey and as a consequence had not experienced organizational life. My myopic view towards the open source methodology of developing projects, and the profound impact this methodology has on the business world in general and the organizational structure in particular, began to broaden after my first intense exposure to the Linux operating system at Bank of America Merrill Lynch. My understanding about the magnificence of this operating system and the process by which it is constantly iterated caused a 180-degree transformation. This consequently cultivated appreciation for the entire process of peer production and the impact it has on today's businesses, both big and small.

Today, mass collaboration is changing the foundational structure of businesses and reshaping the way these entities operate in our highly competitive environment. Collaboration, fueled by open methodologies and peer production, is forcing management to rethink their strategies. Organizations that have previously created walled cities are breaking the barriers and creating public spaces where all can grow and contribute to push forward the boundaries of their businesses as well as the boundaries of industries they operate in.

In his excellent article, "The nature of the firm" (1937), Ronald Harry Coase, the great British economist, makes a strong argument that one of the reasons for the structure of vertically integrated organizations is the "cost of transaction." Perform a transaction inside your firm only if it is cheaper than performing it externally or in the marketplace. The Internet boom and the development of open source software and pooled infrastructure has made it possible for web-based businesses to keep these transaction costs low. Don Tapscot, the author of Wikinomics, dissects this idea: "Transaction costs still exist, but now they're often more onerous in corporations than in the marketplace."

Despite of all the benefits (in terms of quality, speed, and wealth) that open source and the collaborative mode of undertaking projects have generated, there is still some misunderstanding and gap in the appreciation of these significant changes. Some people and businesses still restrict their comprehension of open source as free software that sucks up the wealth of a healthy capitalist society. They do not see the forest for the trees. They see free software as a threat to the enterprise but miss the multi-billion dollar ecosystem that it has created from which businesses of all sizes and types are benefiting.

Here are two cases that reflect the impact of the "open source way of doing things" on the business.

The rise of collaborative organizations

The digital revolution, also called the third revolution, has changed the entire landscape of the business world. After the industrial revolution, no other revolution has changed the fabric of the society as the Internet revolution has changed it. It has given rise to organizations that thrive on volunteers, peer production, and collaboration. Wikipedia, the Mozilla Foundation, Wordpress, Red Hat, and many more are competing today with some of the best financed and resourceful enterprises across the globe. The parameters of this competition are not only governed by cost but defined by quality as well. In 2005, the British Journal Nature conducted a comparative study and found that Wikipedia is as accurate as Encyclopedia Britanica. A Wikimedia traffic analysis report in 2012 shows that Google Chrome has a larger market than Internet Explorer and my second favorite brower Mozilla Firefox has a significant market share. Likewise, Red Hat Enterprise Linux is widely implemented in almost all the big financial corporations not only because of the cost but also because of the stability it adds to the complex technology infrastructures in financial companies.

Even some of the organizations that have a history of opposing and harpooning open source developments are now opening up to collaborations to create win-win situations. Microsoft is the biggest example. Its wholly owned subsidiary, Microsoft open technologies group, follows a community driven approach to create innovative solutions. One recent announcement was the launch of VM Depot, a community driven catalog of open source virtual machine images for Windows Azure.

IBM, a company that became a giant by selling everything proprietary, is another big example and its engagement with the Apache web server project and Linux are well known. In 1999, IBM announced its support to the open source Linux project and since then has contributed consederable financial and technical resources to the Linux community. It played an instrumental role in establishing the Apache software foundation and the Linux development group. Not only did the "big blue" save millions that would have gone into developing its own operating system, it learned and mastered the workings of a new type of business model that was set to change the software industry forever. 

Organizations and institutions across sectors are opening up for new partnerships and utilizing the vast amount of "unique skilled talents" not available within the confines of their companies. Initiatives like InnoCentive, Human Genome project, and MIT and Harvard University's edX program offer platforms and opportunties for world changing innovations.

The big boost to entrepreneurship

The Internet is one of the best things that has happened to humanity. Not only does it open the world up to an individual (and vice versa), it has become a nucleus of global economic activity. More and more people today are making their living by selling bits and bytes. The cost of starting a web-based business is extremely low relative to starting a business that relies on physical channels. This low cost of bootstrapping a business combined with the creative nature of the Internet has encouraged millions to launch their own ventures. The low cost of starting a web-based business has become possible primarily because of the availability of open source software and infrastructure. The free LAMP software stack, which constitutes Linux, Apache, MySQL and PHP, has made it possible for creative and thoughtful people with ideas to start businesses on the Internet that are playing a positive role in pushing forward the human race.

The open source movement and its methodologies have contributed significantly to the business world and created ecosystems that have positively impacted all industries and billions of people across the globe. And this movement has largely been fueled by thousands of volunteers who contribute to these projects for a wide range of reasons, including to grow their networks, enhance their resumes, refine their skills, and just for doing social good.

In the words of Jimmy Wales, the founder of Wikipedia: "We are gathering together to build this resource that will be made available to all the people of the world for free. That's a goal that people can get behind". What struck me as I finished the last sentence was a quote from the movie Pearl Harbour: "There is nothing stronger than the heart of a volunteer."

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Aseem is a graduate of Conrad Business, Entrepreneurship and Technology Center, Faculty of Engineering, University of Waterloo, Canada. He also holds a masters in computers application from Guru Nanak Dev University, Punjab, India. On, he serves as an author. He also blogs at

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