Ann Schlemmer, CEO at Percona.
In Oscar Wilde’s Lady Windermere’s Fan, a cynic is described as “a man who knows the price of everything and the value of nothing” while a sentimentalist is “a man who sees an absurd value in everything, and doesn’t know the market price of any single thing.”
Putting a price on a product or service is one of the most important decisions that a company can make. Yet how can companies in the open-source software market—a market defined by access to software that does not have a license fee and can be used by anyone for any purpose—convince cynical buyers of the value of what they provide?
The New Open-Source Landscape
Using the latest findings from FINOS, I would like to show how the financial sector has largely changed its position around open source. In my last piece, which also included FINOS research, I looked at how banks are now more involved in open-source project leadership, but here I will go into how this sector is now leading and collaborating on these projects. At the same time, the number of companies that have shifted their approaches to non-open source has grown.
My viewpoint is that we need to break the automatic association between free software and value solely due to it being offered at no cost. The real value lies in how it can enable you to achieve more, and at a faster pace, than if you had to rely solely on your own development team to assemble proprietary solutions.
Open-Source Software And Usage
To understand the value of this software, we have to go into the history of open-source software and how it has influenced companies to make significant changes around how they approach licensing their products.
In the beginning, IT companies sold hardware. These large machines were massive room-filling behemoths, and the operating system and software involved was provided as part of the package. As long as you had the money, you got the software you wanted from that supplier.
Over time, this changed. Researchers at AT&T developed a general-purpose operating system that could run on multiple different hardware platforms. From this, independent software vendors launched that could sell their software for all to buy. Then, a new movement sprang up where code was made available to anyone to use as they saw fit.
This movement, which was termed “open source” in 1998 and defined by the Open Source Initiative, made software open to all. Over time, open-source software has become the dominant option in areas like operating systems with Linux and Android, as well as in cloud computing, applications and other areas of the software stack.
The Future Of Open-Source Software
Yet today, many technology companies are turning away from open source. The reason for this? They can’t make money from their projects in the way they used to. While open-source software is free, companies made money by offering training, support and services around those projects.
Today, cloud service providers and competitors can use open-source software and provide their own services around it, taking revenue from those developers. For those companies that invest heavily in software projects, this represents a loss of business opportunity. So why not change the license and stop that competition?
A large number of companies have switched to “source available” or public source licenses, where the code can be inspected but cannot be used for certain purposes, such as to compete with the original developer or to run a cloud service. The argument is that this protects their ability to pay developers to work on the software and have a sustainable business. However, it affects the sustainability of open source in general.
Understanding Value In Open Source
The risk is that less and less companies choose to release their code under open-source licenses in the first place, restricting choice and slowing down innovation. However, I believe this occurs because many technology companies view open-source software only through a short-term monetary lens. Open-source software is valuable not just because it is free but also because it offers better quality solutions for user needs than non-free options.
For companies that want to champion the open-source approach, we have to look at the nontechnical value of open-source software and how companies are willing to pay for this. Users provide insights, contribute code and share expertise to improve software in a collective way. This helps the whole community move faster around commodity software and reduces the cost to make those changes, too.
The industry leading this effort may surprise you. According to the FINOS State of Open Source in Financial Services report for 2024, 50% of respondents said that open-source software use would increase if companies better understood the nontechnical value that this software delivers.
More banks and financial institutions are contributing to open source, with the same FINOS report showing that contributions to GitHub are up by 26% over the previous year. These companies see the value that open source provides, and they are putting direct support into projects.
This community approach benefits everyone involved as it frees up expensive software developer teams to work on the most valuable software each bank has. Making developers more productive has a direct return on investment, so developer velocity is one of the most important and valuable aspects of open-source software.
I believe companies that support open source and want to keep it truly open should develop products that align with and strengthen the community’s values rather than seeking to dominate it.
A Pragmatic Shift To Open Source
The financial sector is normally seen as one of the most cynical markets. It knows the market price of everything. Yet companies in this industry are engaging more and more in open-source software.
This is not sentimental reasoning, but hard-headed realism around how valuable open-source software is for innovation and moving faster in the market. As banks ramp up investment, I expect more organizations in other industries to follow suit, fanning the flames of participation and encouraging a new generation to get involved in open source.
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