Re: [ox-en] Economic impact of open source software on innovation and the competitiveness of the ICT sector of the EU
- From: Stefan Merten <smerten oekonux.de>
- Date: Tue, 04 Dec 2007 21:01:31 +0100
10 months (326 days) ago Soenke Zehle wrote:
From: Philippe Aigrain <philippe.aigrain wanadoo.fr>
I tried to invite him to a conference.
The report of this study has just be put on line on the European
ENTR site at :
Since this is interesting for both the thread on the influence of
companies on Free Software - and vice versa - and the thread on Free
Software and the state I'll post here the executive summary from the
The information economy is a large market. Including the provision of
infrastructure and services for the creation, exchange and processing
of information and communication services as well as the sales of
information itself, this market is now in the range of 10% of GDP in
most developed countries, and accounts for more than half of their
economic growth. Software is one of the key elements driving ICTs'
role in the economy, and the structure, competitiveness, performance
of the ICT industry has potential to be strongly affected by
Free/Libre/Open Source Software (FLOSS1). Financed by the European
Commission's Directorate General for Enterprise and Industry, a study
has been carried out by a team led by UNU-MERIT, the Netherlands, to
identify the role of FLOSS in the economy, its direct impact on the
ICT sector, its indirect impact on ICT-related sectors and to
recommend policies based on forecasted scenarios.
This three-page executive summary highlights the key findings and
recommendations, according to these four categories.
FLOSS role in the economy: market share and geography
* FLOSS applications are first, second or third-rung products in terms
of market share in several markets, including web servers, server
operating systems, desktop operating systems, web browsers,
databases, e-mail and other ICT infrastructure systems. FLOSS market
share higher in Europe than in the US for operating systems and PCs,
followed by Asia. These market shares have seen considerable growth
in the past five years.
* FLOSS market penetration is also high a large share of private and
public organisations report some use of FLOSS in most application
domains. In the public sector, Europe has particularly high
penetration, perhaps soon to be overtaken by Asia and Latin America.
In the private sector, FLOSS adoption is driven by medium- and
* Almost two-thirds of FLOSS software is still written by individuals;
firms contribute about 15% and other institutions another 20%.
* Europe is the leading region in terms of globally collaborating
FLOSS software developers, and leads in terms of global project
leaders, followed closely by North America (interestingly, more in
the East Coast than the West). Asia and Latin America face
disadvantages at least partly due to language barriers, but may have
an increasing share of developers active in local communities.
* Weighted by regional PC penetration, central Europe and Scandinavia
provide disproportionately high numbers of developers; weighted by
average income, India is the leading provider of FLOSS developers by
far, followed by China.
* While the U.S. has the edge in terms of large FLOSS-related businesses, the greater individual contribution from Europe has led to an increasing number of globally successful European FLOSS small- and medium-sized enterprises (SMEs).
Direct economic impact of FLOSS
* The existing base of quality FLOSS applications with reasonable
quality control and distribution would cost firms almost Euro 12
billion to reproduce internally. This code base has been doubling
every 18-24 months over the past eight years, and this growth is
projected to continue for several more years.
* This existing base of FLOSS software represents a lower bound of
about 131 000 real person-years of effort that has been devoted
exclusively by programmers. As this is mostly by individuals not
directly paid for development, it represents a significant gap in
national accounts of productivity. Annualised and adjusted for
growth this represents at least Euro 800 million in voluntary
contribution from programmers alone each year, of which nearly half
are based in Europe.
* Firms have invested an estimated Euro 1.2 billion in developing
FLOSS software that is made freely available. Such firms represent
in total at least 565 000 jobs and Euro 263 billion in annual
revenue. Contributing firms are from several non-IT (but often ICT
intensive) sectors, and tend to have much higher revenues than
* Defined broadly, FLOSS-related services could reach a 32% share of
all IT services by 2010, and the FLOSS-related share of the economy
could reach 4% of European GDP by 2010. FLOSS directly supports the
29% share of software that is developed in-house in the EU (43% in
the U.S.), and provides the natural model for software development
for the secondary software sector.
* Proprietary packaged software firms account for well below 10% of
employment of software developers in the U.S., and "IT user" firms
account for over 70% of software developers employed with a similar
salary (and thus skill) level. This suggests a relatively low
potential for cannibalisation of proprietary software jobs by FLOSS,
and suggests a relatively high potential for software developer jobs
to become increasingly FLOSSrelated. FLOSS and proprietary software
show a ratio of 30:70 (overlapping) in recent job postings
indicating significant demand for FLOSS-related skills.
* By providing a skills development environment valued by employers
and retaining a greater share of value addition locally, FLOSS can
encourage the creation of SMEs and jobs. Given Europe's historically
lower ability to create new software businesses compared to the US,
due to restricted venture capital and risk tolerance, the high share
of European FLOSS developers provides a unique opportunity to create
new software businesses and reach towards the Lisbon goals of making
Europe the most competitive knowledge economy by 2010.
Indirect economic impact: FLOSS, innovation and growth
* Strong network effects in ICT, the related capitalization for
installed dominant players, and some new forms of IPR scope
extension risk leading to innovation resources being excessively
allocated to defensive innovation. There is a case for a rebalancing
of innovation incentives as to create a more equitable environment
for innovation that targets publicly available technology for new
* FLOSS potentially saves industry over 36% in software R&D investment
that can result in increased profits or be more usefully spent in
* ICT infrastructure has a 10% share of European GDP, providing a
basis for a further 2.5% share of GDP in the form of the non-ICT
information content industry. However, a large and increasing share
of user-generated content is not accounted for and needs to be
addressed by policy makers; FLOSS increases the value of the ICT
infrastructure, supporting this wider information ecosystem.
* Increased FLOSS use may provide a way for Europe to compensate for a
low GDP share of ICT investment relative to the US. A growth and
innovation simulation model shows that increasing the FLOSS share of
software investment from 20% to 40% would lead to a 0.1% increase in
annual EU GDP growth excluding benefits within the ICT industry
itself i.e. over Euro 10 billion annually.
Trends, scenarios and policy strategies
* Equitably valuing the use of FLOSS, the "true" share of software
investment rises from 1.7% to 2.3% of GDP in the US by 2010, and
from 1% to 1.4% of GDP in Europe. Doubling the rate of FLOSS take-up
in Europe would result in a software share of investment at 1.5% of
GDP, reducing but not closing this investment gap with the US.
* The notional value of Europe's investment in FLOSS software today is
Euro 22 billion (36 billion in the US) representing 20.5% of total
software investment (20% in the US).
* Europe's strengths regarding FLOSS are its strong community of
active developers, small firms and secondary software industry;
weaknesses include Europe's generally low level of ICT investment
and low rate of FLOSS adoption by large industry compared to the US
* FLOSS provides opportunities in Europe for new businesses, a greater
role in the wider information society and a business model that
suits European SMEs; FLOSS in Europe is threatened by increasing
moves in some policy circles to support regulation entrenching
previous business models for creative industries at the cost of
allowing for new businesses and new business models.
* Europe faces three scenarios: CLOSED, where existing business models
are entrenched through legal and technical regulation, favouring a
passive consumer model over new businesses supporting active
participation in an information society of "prosumers"; GENERIC,
where current mixed policies lead to a gradual growth of FLOSS while
many of the opportunities it presents are missed; VOLUNTARY, where
policies and the market develop to recognise and utilise the
potential of FLOSS and similar collaborative models of creativity to
harness the full power of active citizens in the information
* Policy strategies focus mainly on correcting current policies and
practices that implicitly or explicitly favour proprietary software:
* Avoid penalising FLOSS in innovation and R&D incentives, public
R&D funding and public software procurement that is currently
* Support FLOSS in pre-competitive research and standardisation
* Avoid lifelong vendor lock-in in educational systems by teaching
students skills, not specific applications; encourage
participation in FLOSS-like communities
* Encourage partnerships between large firms, SMEs and the FLOSS
* Provide equitable tax treatment for FLOSS creators: FLOSS software
contributions can be treated as charitable donations for tax
purposes. Where this is already possible, spread awareness among
firms, contributors and authorities.
* Explore how unbundling between hardware and software can lead to a
more competitive market and ease forms of innovation that are not
favoured by vertical integration.
Contact: projekt oekonux.de