People continue to wonder how to make money in the free and open source software world. It’s dressed up in discussions of how one makes money when you give away the software for free, or why developers are working for free. It can likewise lead to a management backlash of not contributing to FOSS projects because some think their developers are working on FOSS instead of their own work. Here’s a different way to think about it. Everyone is familiar with the idea of a normal "bell curve" distribution representing R&D investment over time. As a technology is better understood and a product succeeds in the marketplace R&D investment increases, and over time as new technologies advance the R&D investment in the original technology and product wanes. The function can also represent the "knowledge" gained or the increase in the intellectual asset base. Taking the integral of the normal distribution gives us the total investment and is the “S”-curve that is familiar to many when discussing technology innovation over time. Good companies develop and invest in new successive waves of sustaining technologies. Microsoft’s success in PC operating systems started with DOS, then Windows, and finally enormous investment in Windows NT. Strong companies are good at sustaining innovations and know how to jump from technology to technology along the sustained innovation path. This is easily seen when looking at a single company’s R&D investment. These observations come from Clayton Christensen’s work as described in “The Innovator’s Dilemma.” The R&D investment curves for projects like Linux and Apache still look like bell curves despite lots of individual and corporate contributors. These contributions, however, might best be viewed as a stacked bar chart. Individual contributors invest to meet their specific needs. As a project gains wider use, more contributors get involved. Because there is enormous overlap in their common needs, the sum of the investments remains the same but everyone is sharing the costs. Individual contributors get enormous return on their investment. (One gives a few bug fixes to the Apache httpd team, but gets an entire HTTP server in return.) Organizational contributors give for the same ROI. They get enormous return in the technology they use as a complement to their products and services or as a component in their overall solution to the customer when compared to the investment in their contributions. One can see this with the continued growth in the Linux community as it is adopted by more and more embedded device and mobile handset manufacturers. One only need read the Linux Foundation report charting the growth statistics in the Linux kernel to understand the enormous shared value generation happening release-on-release, four times a year. The economics of open source works. The value gained by each contributor is enormous when compared to the cost of contributing. Nobody is working for free.
To understand the economics of open source, look to the R&D of collaboration.
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