Why People Give Software Away: Open Source

How open-source software is built by volunteers and companies who share code freely, and the economic reasons it works.

Much of the world’s digital infrastructure runs on software that anyone can download, use and modify for free. The Linux operating system runs most of the world’s web servers and underlies Android phones. The software behind many websites, databases and programming tools is open source: its source code is shared publicly under licences that allow others to use and change it.

A puzzle for economists

At first, open source looks like an economic puzzle. Why would skilled programmers spend time creating something valuable and then give it away? And why would profit-seeking companies pay employees to write code that competitors can use for free?

The answers

Economists, including Josh Lerner and Jean Tirole, have studied the motives:

Signalling skill: contributing good code publicly shows employers what a programmer can do, like a public portfolio.
Scratching an itch: many developers write code to solve their own problems, and sharing costs them little.
Learning and enjoyment: many contributors enjoy the work and the community.
Selling complementary products: companies give away software and earn money from related services, support, hosting or hardware. This is a strategy of complementary products.
Sharing costs: many firms need the same basic tools. Building them together is cheaper than each building its own.

A shared foundation

Several large technology firms compete fiercely, yet they all contribute code to the Linux kernel. Each needs a reliable operating system for its servers and devices. By sharing the cost of maintaining it, each saves money and focuses its own spending on the products where it actually competes.

Problems and risks

Open-source software can behave like a public good: everyone benefits, but few pay. Some widely used projects are maintained by a handful of unpaid volunteers. When a serious security flaw called Heartbleed was found in the OpenSSL software in 2014, it revealed that a tool used across much of the internet had very little funding. Since then, companies and foundations have increased support for critical open-source projects.

Thinking open source means no one is paid

Many contributors are volunteers, but a large share of open-source code is written by paid employees of companies that depend on it. Open source is less a rejection of markets than a different way of organising shared work.

Key takeaways

Open-source software shares its code publicly, and much internet infrastructure depends on it.
Programmers contribute to show skills, solve their own problems and enjoy the work.
Companies contribute to share costs and sell complementary products and services.
Critical projects can be underfunded, as the 2014 Heartbleed flaw revealed.