The Business of Free Software: Enterprise Incentives, Investment, and Motivation in the Open Source Community

by Marco Iansiti & Gregory L. Richards

Overview — IBM has contributed more than $1 billion to the development and promotion of the Linux operating system, and other vendors such as Sun are ramping up open source software efforts and investment. Why do information technology vendors that have traditionally sold proprietary software invest millions of dollars in OSS? Where have they chosen to invest, and what are the characteristics of the OSS projects to which they contribute? This study grouped OSS projects into clusters and identified IT vendors' motives in each cluster. Key concepts include:

Cluster 1, the "money-driven cluster," consisted of projects that have received almost all of vendor investments. The eighteen projects in this cluster have received over $2 billion in investment.
Cluster 2, the "community-driven cluster," has a large number of projects that have received almost no vendor investment. IT vendors have generally ignored projects in this cluster and appear to have no coordinated strategy for dealing with them.
Examining the impact of projects in both clusters shows that vendors have not invested uniformly in high-impact OSS projects. Instead, vendors invest in projects that can serve to draw revenues to their own (largely proprietary) core business.

Author Abstract

In this paper, we examine the motivations of large information technology ("IT") vendors, to invest in open source software ("OSS"). What drives companies with large, proprietary software portfolios to invest hundreds of millions of dollars in OSS? We approach this question by grouping a sample of OSS projects into clusters and examining vendors' motivations for each cluster. We find one cluster has received almost no investment. Contributions to projects in this cluster are confined to the voluntary effort of the vendors' employees, and vendors are likely altruistically motivated. By contrast, the other cluster has received over 99% of vendor investments. Here, vendors are more likely economically motivated to invest in OSS projects that can serve as a complementary asset to vendors' core, proprietary businesses.