ActInf OrgStream 009.1 ~ The Value of Open Source Software (Hoffmann, Nagle, Zhou)

The Value of Open Source Software
Manuel Hoffmann, Frank Nagle, Yanuo Zhou
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4693148
Abstract: The value of a non-pecuniary (free) product is inherently difficult to assess. A pervasive example is open source software (OSS), a global public good that plays a vital role in the economy and is foundational for most technology we use today. However, it is difficult to measure the value of OSS due to its non-pecuniary nature and lack of centralized usage tracking. Therefore, OSS remains largely unaccounted for in economic measures. Although prior studies have estimated the supply side costs to recreate this software, a lack of data has hampered estimating the much larger demand-side (usage) value created by OSS. Therefore, to understand the complete economic and social value of widely-used OSS, we leverage unique global data from two complementary sources capturing OSS usage by millions of global firms. We first estimate the supply-side value by calculating the cost to recreate the most widely used OSS once. We then calculate the demand side value based on a replacement value for each firm that uses the software and would need to build it internally if OSS did not exist. We estimate the supply-side value of widely-used OSS is $4.15 billion, but that the demand-side value is much larger at $8.8 trillion. We find that firms would need to spend 3.5 times more on software than they currently do if OSS did not exist. The top six programming languages in our sample comprise 84% of the demand-side value of OSS. Further, 96% of the demand-side value is created by only 5% of OSS developers.

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