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Why Open Source Stifles Innovation

(originally published by Booz & Company)

Open Source Software: It’s Not Just a Good Idea, It’s the Law! No, you won’t be seeing those words on bumper stickers anytime soon. But little by little, lawyers, lobbyists, and politicians are becoming very interested in open source, and they aren’t likely to leave its fate to market forces. What began as a grass-roots programmer rebellion against commercial software is rapidly evolving into a political struggle that could retard innovation and balkanize the software market.

Software that costs nothing to license and comes with the underlying source code available for all to see has penetrated the mainstream. Companies as varied as Boeing, Amazon, Google, and E-Trade are using the open source operating system Linux. Two other open source programs, Apache (for hosting Web sites) and Sendmail (for routing e-mail), are nearly ubiquitous.

This success has been good news for businesses, since it’s forcing commercial software makers to price low. But the future of open source is clouded by ideology and politics.

The copyright holders of open source software — typically nonprofits controlled by the principal developers — have broad discretion to set the terms for its use. And most are choosing to distribute under what is called the General Public License (GPL).

Anyone is free to use GPL software (like Linux) at no charge, and is equally free to modify it. But new software that incorporates strands of code from GPL software must also be distributed under the GPL. This makes it impractical to integrate ideas from GPL software in proprietary software because anyone would be free to copy the enhancements.

The “viral” quality of GPL software is intentional: Proponents happily acknowledge that the goal is to undermine incentives to create software that carries a price tag. But for those of us without ideological qualms about software as private property, the wall that GPL erects between open source and proprietary software seems unfortunate.

It is especially unfortunate when government builds the walls. The U.S. government has long been a font of research in software that has made the leap to commercial products. But in the absence of a formal policy, some federal software is being released under the GPL. In fact, NASA, the Sandia National Laboratories, and the U.S. Department of Defense have all distributed code with GPL restrictions.

It is hard to assay the damage in terms of duplicated effort or advances in commercial software that will never be made. But the analogy to another technology-driven industry does hammer home the point: If federal research in medicine had been distributed under some equivalent of the GPL, the spectacular burst of innovation in drugs and genetic engineering by private enterprise in the last decade would have been delayed.

The distribution of GPL software by the government is largely inadvertent. But outside the U.S., resentment of American dominance of software neatly dovetails with concerns about the superpower’s disproportionate influence over high technology and foreign government’s tendency to favor domestic software producers.

The German government has funded private German efforts to develop security software to be licensed under an equivalent to the GPL. In China, the People’s Daily newspaper reported that government agencies would “join forces to encourage strengthening of the nation’s software industry in a bid to pry the computer industry from the grip” of foreign commercial software companies. And Taiwan has launched an ambitious initiative to wean computers from Windows, funding R&D in open source software and training tens of thousands of workers in Linux.

The growing involvement of government in open source is most immediately the concern of the proprietary software industry. Microsoft has the most to lose because Windows sits at the top of the software food chain. But integrated hardware/software companies like IBM, which are supporting open source, could also lose as they sacrifice high-margin software licensing for scraps from the open source table.

Businesses have a stake here, too. It certainly makes sense for firms to compare the life-cycle cost of open source and proprietary software in their procurement decisions. But government-led success of open source could undermine the network economies that have driven some software market niches toward winner-take-most outcomes.

Thus, while firms may find that the advantages of using free software outweigh the disadvantages, they have not yet had to confront the headaches of a world in which they must worry about the compatibility of files produced on different software platforms or about the need to train employees to use applications for multiple platforms.

The success of open source could also retard innovation. As noted earlier, GPL software cannot be integrated into proprietary software. By the same token, an attenuated market for proprietary software would reduce private incentives to invest in software development.

Open source is here to stay. But whether it will, in the end, prove a boon to global productivity depends on how the competition with commercial software plays out as commerce mixes with ideology, nationalism, and special-interest politics.

The bottom line for business: Enjoy something for nothing, but be wary of ideologues who would restrict your diet to free lunches.

Peter Passell,
Peter Passell is a former New York Times economics columnist, is a senior fellow at the Milken Institute in Santa Monica, Calif. He has worked as a consultant for the Microsoft Corporation.
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