Open Source: A paradigm shift for the IT Industry

Open Source is the biggest disruptor the software industry has ever seen and it will eventually result in cheaper software and new business models…


Gartner’s predictions now suggest that in coming years, OSS’s impact on application software will cross $19 billion, with a five-year CAGR of 44%. With the Open Source Initiative (OSI) organization and thousands of developers worldwide backing OSS, its impact on the $170 billion IT industry needs a closer look.


Major players in the open source space

Open Source Software (OSS) is collaboratively developed computer software with its source code made public. Over the past decade, OSS has seen rapid growth in the industry owing to the price, reliability and flexibility benefits it offers. The growth of Open Source Software (OSS) has altered the fundamental nature of the industry in a true sense as an increasing number of business models are switching to OSS. It has given rise to major implications for the IT industry while also carving out niche segments in the industry such as Open Source Consulting etc.


So why has OSS grown exponentially? What factors have driven software giants to using as well as publishing open source?

The biggest factor that propelled OSS onto the main stage was the cost advantage, but, contrary to popular belief, it is not the only benefit that organizations derive from OSS:

Security – Linus’s Law (named after Linus Torvalds, Linux creator and OSS pioneer) states, “Given enough eyeballs, all bugs are shallow”. OSS offers enhanced security by leveraging the strength of its developer base to quickly identify and fix bugs.

Quality – OSS offers immensely better quality of code. Imagine thousands of developers constantly striving to innovate and contribute to an OSS versus a handful of developers shipping out a licensed software package.

Trial & Support – OSS also offers great trial and support options. As the code is free, organizations can try it out at will, and with hundreds of communities and online forums of open source developers, support is never far away for the users.

Flexibility – Other benefits come in the form of amazing customizability, freedom and flexibility the code offers. Organizations typically tweak the code with minimal effort to best match their requirements, a relatively well-known example being that of Goobuntu, a ‘long term support’ version of Ubuntu developed and used in-house by Google.

Hybrid Business Models

In addition to pure open source companies, the growth of OSS has been fueled by proprietary software companies pursuing a ‘hybrid’ business model. There have been numerous instances of software giants open sourcing some of their products: Adobe open sourced its Flex tool while Yahoo did so with the Flickr API. This has lent credibility to the OSS bandwagon and prompted firms and venture capitalists to invest in open source. In September 2013, IBM announced a gigantic $1 billion investment in the Linux platform.


OSS has been able to penetrate almost all sectors of the software industry, ranging from ERP to Server OS and has made inroads into the public consumer segment as well (as depicted by the graph). While OSS continues to grow unbounded, it becomes critical to address the problems associated with OSS. The biggest gray area for OSS is legal uncertainty. There are unaddressed issues with the interpretation of open source licenses (such as GPLv2) which use an array of loosely defined terms such as ‘derivative work’.

Open Source Software Usage Adaption (%age)

Open Source Software Usage Adaption (%age)

Another problem lies in the management of OSS on a large scale. Many companies build their core business models on top of an open source code or platform. This necessitates the formulation of a sound usage policy, failure of which could hugely devalue the product. This was the case with Cisco’s $500million acquisition of Linksys where the Free Software Foundation successfully claimed release of open source based elements of Linksys. Other trivial issues include limited user-friendliness and lack of ‘formal’ technical support. The growth of OSS is sustainable only if these issues are eliminated, otherwise, the software industry will soon be entangled in a web of lawsuits, plagiarism and uncertainty.


Three distinct schools of thought from the software world have sparked the Open Source vs. Free Software vs. Closed Source debate for paving the growth of the industry. While advocates for Closed Source bank upon benefits such as saving intellectual property and minimizing competition, they restrain innovation and reusability for the industry. On the other hand, Free Software offers unmatched cost benefits and a ‘morally right thing to do’ argument, while suffering from loopholes such as poor quality and low accountability. In such a business environment, open source attempts to pave a middle way promising highly flexible, reliable code at minimal cost. But with the open source issues remaining unaddressed, the promise might not always be realized which means that the three-fold software debate continues to heat up.


Abhinav is a PGP 1 student at IIM Ahmedabad and a member of the Consult Club. He holds a Dual Degree in Computer Science from IIT Roorkee and has worked at Adobe for 10 months before coming to IIM Ahmedabad. He will be interning with the Boston Consulting Group. He is passionate about reading, traveling and playing volleyball.