[DarkShikari]

No he isn't.

If Company X gains $1,000,000 savings due to investing $700,000 in developing a piece of software, they have earned $300,000. Then, they open source the software, and improvements to it by outside contributors result in them saving another $500,000.

Then, Company Y adopts the software and uses it to save $2,000,000. They improve it as well, which results in them saving another $500,000 and Company X saving another $300,000.

Total profit: $3.8m

Compare this to the alternative:

Company X gains $1,000,000 savings due to investing $700,000 in developing a piece of software, they have earned $300,000. Then, they keep the software closed. No contributions are made by outside users.

Then, Company Y writes their own version of the software for $700,000 and uses it to save $1,500,000, less because they don't have the improvements made by outside contributors. They don't have the logic from Company X to combine with theirs, so they don't improve it, and they don't save any extra money. Company X doesn't save money either, since they don't get anything back.

Total profit: $1.1m

Everyone involved made more money in the first situation than the second, despite Company X giving up their source code to be used by other companies as well. This works completely fine under existing systems and requires nobody to arbitrarily throw money at open source for no potential gain.

Open source is the free-market solution to the problem of inefficiency due to competition--everyone implementing their own versions of software and in the end generating a worse result than if they had worked together.

[caffeine]

What you've proven is that if I choose whatever numbers I want, and add and multiply them together in whatever order I choose, I can get whatever answer I please.

Also, if you read the article, he doesn't argue that source code should be closed - he argues that it should be paid for.

[olefoo]

Let's turn his analogy around and ask, if every startup and nonprofit that ever wanted to put up a website had to either buy or build a webserver, would the web as we know it exist? More to the point would the standard protocols and encodings that we mostly take for granted have evolved? Or would we all be coding for aolserver and bitching about how to get our websites approved on different cable networks?

And the stuff about the source being paid for is a red herring, only a very few licenses prohibit the sale of software (and the GPL explicitly allows it, the only restriction is that if you sell software built with GPL components you must provide the source as well as the object code).

[mixmax]

Another alternative is that a nimble startup creates a piece of software to solve the problem and sells it to 1000 companies at $10.000 a pop. This way the companies get their software even cheaper, and another beautiful startup is born.

With a contrived example you can prove anything :-)

[DarkShikari]

Of course, but most of the time when software is created for an internal use, the company doesn't want to be in the business of selling said product.

[rubinelli]

Most custom-built software is too tied to internal processes to be useful outside, because a generic solution always costs more (the consensus is 3x). Most successful OS projects that have this source solve a narrow, highly technical problem.