How to Save $1 Trillion a Year with Open Source

September 28, 2009

Posted by: Glyn Moody

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Michael Tiemann probably has more experience in making money from free software than anyone. He set up his company Cygnus as far back as 1989, a little while after coming across Richard Stallman's GNU C Compiler (GCC). He was amazed by its quality, and decided that it must be possible to build a business around it. As he told me ten years ago:

It comes down to my relatively simple belief that free markets are really the right way to run economies, and that if you've got a better way, it should be possible to make that profitable and successful.

He talked to Stallman about his plans, and the latter's response even at this early stage gives the lie to those who claim that RMS is against people making a profit from free software:

I did want to get his blessing, as it were. He said: “absolutely” [to the idea of starting a company based around the GCC], as long as you adhere to the GNU Public Licence.

Stallman's love of recursive acronyms manifested itself once more: he claimed that Cygnus stood for “Cygnus, Your GNU Support”, although Tiemann comments:

That's like saying Emacs stands for “Eight Megabytes And Constantly Swapping”. The reality of the situation was that we couldn't find any names that were not previously registered. When I lamented this fact to a couple of my Net friends, one of them searched the dictionary for words that contained “GNU”. And “Cygnus” seemed the one that was least obscene. But people very quickly attributed what “Cygnus” might actually stand for. I'm happy for Richard to own one of those definitions.”

Cygnus flourished, and in 1999 was acquired by Red Hat. Since then, Tiemann has had various roles at the company, and today rejoices in the job title of Vice President of Open Source Affairs. This essentially gives him scope to ponder some of the deeper questions of open source theory and practice, and to travel around the world imparting his ideas in a wide range of contexts.

I spoke to him last week when he was in London for a lightning visit before rushing off to yet more locations to spread what turned out to be a consistently upbeat view of open source – indeed, I've rarely met someone so optimistic about its future.

In essence, that optimism stems from the magnitude of the savings that open source can bring to companies – and the world economy. Tiemann spells this out in a fascinating paper [.pdf], entitled “How Open Source Software Can Save the ICT Industry One Trillion Dollars per Year”.

I urge you to read in full discussion, but here is the argument in essence:

The $1T per year figure is extrapolated from the statistics that world-wide ICT is expected to top $3.4T USD in 2008 and because 18%-30% of all ICT investments, predominantly based on proprietary software because that is the dominant model of the industry today, are dead-loss write-offs.

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Before explaining how open source can remedy the $1T USD problem, it is instructive to look at a contrary view, which is that in 2008 Open Source Software costs the IT industry $60B per year in lost licensing fees. That is to say that because of open source software, IT customers spent $60B less than they would have otherwise. Clearly this is a case of glass-half-full/glass-half-empty: the customers who were able to spend less on ICT were able to create more value for themselves 10. We shall now see that this $60B/year savings is just a small fraction of the total potential savings that open source solutions can deliver on a global basis.

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