Open to development: Open-Source software and economic development


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Original name: Open to development: Open-Source software and economic development

Type of work: Working Paper


Free Software | ICT4D


Open to development: Open-Source software and economic development

Open Source software not a route to economic development in developing countries Debroy, B.; Morris, J. / International Policy Network , 2004

This paper examines the role that open-source software can play in an economy and its development, with a focus on empirical evidence and economic logic. It argues that, while open-source can clearly be a viable part of a developed software industry, the available evidence does not support the position that open-source software can form the basis of an industry on its own, especially in nations where the technology sector is still embryonic.

The paper:

puts the open-source/development debate into perspective by providing some statistics on how software has contributed to the economies of developed nations. It also provides some background on the differences between open-source and proprietary licenses, distinctions that are crucial for the creation of an income-generating industry discusses recent government forays into open-source software. Some of these efforts have been sensible, attempting to increase awareness of open-source solutions. Others have been less sensible, attempting to dictate software solutions regardless of the individual circumstances examines the various claims made in favour of open-source as a development tool. Many of these arguments fall flat because their chain of logic relies on one or more leaps of faith that do not square well with actual experience.

It concludes that the case for open-source software as a growth and development tool is weak. Often, the arguments muddle reasons for using the software with reasons the software might promote economic growth. The low initial cost of open-source software, the freedom it affords from Western-based companies, and the opportunities it can provide for local programmers may well be valid points, but none of them speak to the ability of open-source to spur economic growth or even to its ability to establish a viable local software industry.

The most prominent example in the developing world of a newly emergent software industry is India, where open-source played no role. The rapid growth of India’s software exports, which comprise 70% of its software industry, can be attributed to its comparative advantage in labor. India has a large reserve of well-qualified, English speaking engineers and technicians that it has parlayed into outsourced proprietary software production for mostly Western clients. These particular circumstances raise the question of whether India’s experience can be replicated elsewhere among developing countries. Only a few developing countries, such as Russia and China, have a larger reserve of engineers than India. These countries have other disadvantages, though, such as a lack of international language skills.

At a more fundamental level, it is unclear whether a national software industry (if it can be created) can help spur general economic development. Even in the world’s largest software producing nation, the United States, the link between the tech sector and general productivity growth are much disputed. The best to be hoped for from government support of open-source software, is that it is an enabling technology. The pure open-source model is not capable of supporting for-profit firms. While the service-support model can provide sustainable profits, as the U.S. experience has demonstrated this model can only support a handful of firms at best. Moreover, the support model requires a broad open-source user market, more than one government alone can provide. Proprietary software applications designed to run on opensource software appear to be the most viable profit-making option, ala IBM. However, if creating profitable hardware, service, and support companies is the ultimate goal, then it implies a much different policy program. Governments supporting open-source software at the expense of proprietary software will not aid the creation of this kind of growth, and may even hinder its development.

While developing nations’ interest in open-source is understandable, given its low investment costs and the overall appeal of software, the open-source model on its own does not appear to provide a solid foundation for profitable business operations that can meaningfully contribute to a nations’ economic growth.

[adapted from author]