Publications
Publications
- 2024
- HBS Working Paper Series
The Value of Open Source Software
By: Manuel Hoffmann, Frank Nagle and Yanuo Zhou
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.
Keywords
Citation
Hoffmann, Manuel, Frank Nagle, and Yanuo Zhou. "The Value of Open Source Software." Harvard Business School Working Paper, No. 24-038, January 2024.