It's the Metric, Stupid

A great post by Stephen O'Grady pondering the likelihood or otherwise of billion-dollar open source companies appearing anytime soon. It contains a number of wise comments that make it well worth reading. For example:

So you look a little deeper and see that while open source might not (yet) create immense, monolithic wealth, it does benefit customers by lowering pricing and increasing choice. Further, it seems illogical to believe that even if open source can lower certain software acqusition and operating costs, those dollar savings are not invested elsewhere. How many CIOs will go their board and say "I invested in Linux, JBoss, & MySQL and saved us x dollars - please lower my budget accordingly"? You might also see that open source allows vendors to ammortize a number of traditional development, quality assurance and marketing costs, across a wide pool of volunteer resources, lowering the dollars they need to operate (you should hear Alfresco's Kevin Cochrane talk about the delta in saleperson costs - it's eye opening).

Quite. But I would go much further.

The reason we will probably never see a billion-dollar open source company is the fact that turnover is the wrong metric to focus on for such entities. Looking purely at income misses out on all the other kinds of value that are involved - for example, all the software that is downloaded and used by people who aren't paying customers. It excludes the value added to the open source ecosystem in terms of helping other free software projects, either directly through code re-use, or indirectly by promoting the overall concept.

These are all things that open source companies do routinely, and yet they receive next to no credit for it - financial or otherwise. It's part of a wider problem with current economics analyses that also typically don't take into account factors like environmental damage when estimating costs of production.

And at a deeper level still, there is something that O'Grady himself touches on:

Open source in many respects seems to underpin a future in which more people will make less, rather than less people making more. I know which I'd pick.

Focussing only on the money involved completely overlooks other crucial elements of free software: the social and ethical aspects. It's good to see that O'Grady is one of the people who gets this.

Update: Apparently, Matt Asay disagrees with O'Grady (and hence me).