Economics behind the Open Source Model

Economics is often linked with a rationale of understanding the flow of money. This can be considered analogous to amateurs linking open source paradigm to free software! Both economics and open source software have a wider horizon.

Economics is majorly about understanding the management of resources in a system while Open Source is based upon a lot of operations which do not necessarily involve the “free” element in it. To be precise, Open Source and Economics are related in a sense that they require time and effort to be quantified and measured by both - producers and consumers. The “perceived value” of these resources in the Open Source community is actually worth pondering a thought over.

The successful economic paradigm shift in developing free software for people is actually looked down by the traditionalists in terms of it having an economically detrimental effect on the proprietary software industry. But in verity, the fact is that successful economic models applicable to the Open Source are both sustainable and of stupendous benefit to the overall software industry.

The economic model that is directly applicable here is the concept of “market” which forms a basis for free market economics i.e. supply and demand of a specific product or service. Like other markets, Open Source also constitutes for the demand of a product resulting in its supply and a source which acts as a medium for exchange.

A few identifiable products and services which are exchanged in the Open Source market include;

Today, a company - big or small, needs software to implement business operations and hence make it more efficient. The two main factors that influence the Open Source market are enablers of technology and differentiating parameters of business. The main economic archetypes of Open Source software development are;

The effectiveness of Open Source economics can be understood by the fact that it has largely contributed towards the development of web 2.0 generation, enabling testimony to the verity that it is much more beyond software and technology.

The addition of value is the key prerequisite for an economic models to be able to sustain over a period of time. Hence, for an Open Source business model to be successful, the most important factor is its ability to deliver value to businesses, contributors and consumers.

The Open Source movement is here to stay for long. It has acted as a serious value creator and resulted in revenue generation mechanisms for businesses, both - small and big.