Open source software is a result of a modern method of production, distribution and funding of knowledge that is sometimes called “commons-based peer production” by people like Yale Law School professor Yochai Benkler.
In his 2006 book The Wealth of Networks: How Social Production Transforms Markets and Freedom, Benkler discussed the growing importance of networked production models, both market and non-market, and how this contrasts and competes with the incumbent industrial information economy.

Non-proprietary strategies have always been more important in information production than the production of tangibles such as steel or automobiles. The most obvious reason is that knowledge is non-rivalrous. As Thomas Jefferson wrote in 1813, “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”

This non-rivalry leads to the fact that knowledge has a zero marginal cost for the producer of that knowledge. While there are resources expended to create the first copy, there are no further resources that need to be expended by the producer for additional copies. In a free market we tend to see products offered near their marginal cost, which for knowledge would be zero. While incumbent industrial information business models that relied on charging royalties per copy to fund fixed development costs have dominated our recent past, changes in the marketplace are now increasingly including zero marginal cost methods.

Historically we did not have the tools to allow for the large collaborative efforts needed to produce knowledge goods such that individual contributors would not need large investments to participate. We can now produce everything from alternative operating systems and software applications, to encyclopedias, with the emergence of new communications technology making this possible. With the ability to collaborate between participants from all sectors of the economy, and include a variety of motivations that are both market and non-market, it seems clear to me that in the longer term this modern method will eventually out-compete any method that only include specific sectors (commercial software vendors) and market motivations for many knowledge goods.

Just outsourcing
When we survey people during this transformative change we are going to get a mixture of results that are dependant on how people understood the question. There are those who are going to be answering from the point of view of acquisition, answering whether they receive their software from commercial vendors or directly from the community that produces the software. We must not misinterpret those who use commercial vendors as not using open source, but as an organization that has outsourced to some intermediary various aspects of interacting with this community.

With this as background, we can look at the previous analysis in a different light. It is not surprising that those in the manufacturing sector are early adopters of open source methods. Those who manufacture products with embedded software need to deal with the costs of that software for each physical product they ship. Any method of production that allows them to have a zero marginal cost will have benefits that increase with the number of units shipped. In-house software production has a fixed cost, and they can lower that fixed cost while keeping the zero marginal cost by participating with open source communities for various software components. Manufacturers of specialized hardware also do not need to deal with the costs of transitioning customers from an incumbent software vendor, given they are going to be creating customized applications that provide the entire user experience.

If we are within a transformative market change, it is also not surprising that smaller businesses are able to adapt more quickly than larger organizations. This isn’t unique to open source, but is a trend that is generally true. Larger businesses that see themselves as dependant on proprietary business methods will also be less likely to experiment with emerging collaborative methods.

The least likely organizations to adopt open source are those where this method competes with their core business. This is one of the reasons why looking at the views of vendors, or people who trust what their vendors are saying, are a poor indication of the state of the change. Most of the benefits that are received by customers, as well as commercial and non-commercial participants in the generation of open knowledge, are at the expense of the incumbent proprietary knowledge vendors. This should neither be surprising, nor a cause for concern.

Russell McOrmond is CLUE’s policy director. Shane Schick will return on Tuesday.

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