The Value of Open Source Software  [[3. Resources/Readwise/Full Document Contents/Articles/The Value of Open Source Software|Full Document Contents]] ## Document Notes > [!note]+ Document Notes > tags: > - #OpenSource > - #SoftwareEconomics > - #WordPress > Author: Manuel Hoffmann, Frank Nagle, Yanuo Zhou > Source: Working Paper 24-038, Harvard Business School; University of Toronto > Reference: https://www.hbs.edu/faculty/Publication%20Files/24-038_0a9c3f0f-1e6f-4c8a-9d7a-2c0a8b5a6f9a.pdf > date created: 2025-08-27 08:00 > > # Title: The Value of Open Source Software — Demand vs. Supply Value at Global Scale > <!-- deep-read:sections start --> ## Table of Contents: - 🔎 Overview & Context (#overview--context) - 🧩 Data Sources & Scope (#data-sources--scope) - 🧮 Methods: Measuring Value (#methods-measuring-value) - 💡 Key Findings (#key-findings) - 🧭 Implications for Firms, Policy, and OSS Sustainability (#implications-for-firms-policy-and-oss-sustainability) - 🧑‍💻 Developer Contribution Inequality (#developer-contribution-inequality) - 🏗️ Limitations & Assumptions (#limitations--assumptions) - 📚 References (#references) ### References: - Greenstein & Nagle (2014); Murciano-Goroff et al. (2021); Blind et al. (2021); Robbins et al. (2021) - COCOMO II estimation: Boehm et al. (2009) - Data sources: Census II (Linux Foundation/LISH); BuiltWith; GHTorrent; GitHub Octoverse (2022) ## 📝 Summary: The paper quantifies the economic value of widely used open source software (OSS) by combining two perspectives: - Supply-side: labor cost to recreate the OSS corpus once. - Demand-side: replacement value if every firm using the OSS had to build and maintain it internally. Using global firm usage data (Census II and BuiltWith) linked to GitHub repositories and costed via COCOMO II with global wage data, the authors estimate: - Supply-side value: $4.15 billion. - Demand-side value: $8.8 trillion. They conclude that without OSS, firms would need to spend approximately 3.5× more on software than they currently do. Value is concentrated: the top six languages account for 84% of demand-side value, and 5% of developers create 96% of it. The work underscores OSS as a global public good whose economic impact is dramatically undercounted by traditional measures. ## 📖 Main Content: This study addresses a measurement gap: OSS is free and decentralized, so traditional accounting misses both its widespread adoption and its counterfactual costs. Prior research mostly estimated recreate-once costs (supply) or focused on single OSS categories. Here, the authors integrate firm-level usage from two complementary vantage points: - Inward-facing software embedded in products (Census II via software composition analysis scans across thousands of firms; 2.7M usage observations in 2020). - Outward-facing website technologies (BuiltWith scans of ~8.8M websites; filtered to commercial domains via Orbis/Compustat/PitchBook; 3.4M business websites matched). They map packages to GitHub repositories (1,840/2,000 top Census packages matched), count human-written code lines (via pygount and linguist; primary estimates use a “human-written” bucket of languages), and cost recreation using COCOMO II with global wage data. Demand-side value multiplies recreate cost by the number of adopting firms (reflecting the world where OSS didn’t exist at all). A supplementary “goods market” approach benchmarks OSS against baskets of proprietary equivalents to triangulate estimates. Findings: - Massive demand-side value ($8.8T) dwarfs supply-side ($4.15B). - Absent OSS, firms’ software expenditures would be ~3.5× higher. - Value is highly skewed: top languages (C/Java/JavaScript/Python/TypeScript + Go) dominate; JavaScript and TypeScript lead in web contexts (BuiltWith). - A tiny share of developers generate most value (5% → 96% of demand value), confirmed via Lorenz curves using GHTorrent contributions weighted by repo value. Policy and managerial implications emphasize moving beyond pure “security hardening” to sustaining creation and maintenance, with special attention to core maintainers and critical packages. For firms, contributing back is economically rational relative to the counterfactual of full in-house development. ### 🗒️ Notes - Problem addressed: - OSS value is hard to measure due to non-pecuniary nature and decentralized usage. - Previous estimates lacked either breadth (all OSS) or depth (firm-level usage). - Data strategy: - Census II (inward/product OSS), BuiltWith (outward/web OSS); minimal overlap (only 18 packages overlap). - Packages mapped to GitHub repos; 1,840/2,000 matched; long tail (~30%) not included in Census top list. - Developer contributions from GHTorrent; bots filtered conservatively (~12%). - Costing methodology: - Lines of code for “human-written” languages; COCOMO II; global wage adjustments. - Demand value = recreate cost × number of adopting firms (counterfactual: no OSS at all). - Cross-check via “goods basket” of proprietary substitutes (e.g., LibreOffice ↔ Microsoft Office; MySQL ↔ Oracle/MySQL; GIMP ↔ Photoshop). - Headline results: - Supply-side: $4.15B; Demand-side: $8.8T. - Firms would spend ~3.5× more on software without OSS. - Top 6 languages drive 84% of demand-side value; JavaScript dominates web stack usage. - Concentration: - 5% of developers create 96% of demand-side value. - Contributors with broad repo participation tend to account for outsized value. - Implications: - For firms: Contribution and maintenance investment are small relative to counterfactual costs; mitigate free-riding risks. - For policymakers: Move from security-only interventions to creation funding and maintainer support. - For ecosystem: Prioritize critical packages and maintainers; dependency transparency; diversified funding mechanisms. - Links to broader debates: - Addresses “productivity paradox” by revealing large, hidden cost-savings and productivity gains from OSS. ## 📖 References: - Working Paper 24-038 (HBS): The Value of Open Source Software - Census II: https://www.linuxfoundation.org/research/census-ii-of-free-and-open-source-software-application-libraries - GitHub Octoverse 2022 (top languages): https://octoverse.github.com/2022/top-programming-languages ## 🗣️ Paraphrase: 1) Original idea: “We estimate the supply-side value by calculating the cost to recreate the most widely used OSS once, and the demand-side value by calculating a replacement value for each firm using the software.” Paraphrase: The authors compute two complementary price tags for OSS. First, they estimate what it would cost the world to rebuild the most popular open-source projects a single time. Second, they determine what companies would pay if each of them had to develop their own substitutes internally for every open-source component they rely on. 2) Original idea: “We find that firms would need to spend 3.5 times more on software than they currently do if OSS did not exist.” Paraphrase: In a world without open source, corporate software budgets would balloon—on average, organizations would face roughly three-and-a-half times their current spending to replace what OSS provides today. ## 📰 Newsletter: This week in Web Dev and Open Source: - Learning corner: If you’re brushing up on the modern stack, prioritize JavaScript/TypeScript—new research confirms these languages account for the lion’s share of web-facing OSS value. Pair that with fundamentals in HTML/CSS and version control (Git/GitHub) to build a durable base. - Big picture: A new working paper from Harvard Business School estimates OSS’s supply-side value at $4.15B and its demand-side value at a staggering $8.8T. Translation: without OSS, firms would spend ~3.5× more on software. That’s the real-world ROI of our collective pull requests. - Community highlights: Shoutout to maintainers—data shows 5% of devs generate 96% of demand-side value. If your company runs on a project, consider sponsoring it or contributing docs, tests, and security fixes. - New and noteworthy plugins: Keep an eye on performance-focused tools for WordPress and Node-based build pipelines. Look for TypeScript adoption and clear contributor guides—the projects with better onboarding (and typed APIs) are shipping faster and safer. - Resources: - HBS Working Paper: The Value of Open Source Software - GitHub Octoverse: Top programming languages Tip of the week: Add a CONTRIBUTING.md to your repo with a 5-minute “first issue” path. Lowering cognitive load increases first-time contributions—your future self will thank you. ## ✅ Action Items: Strategic prompt for aligning articles to your Developer Advocate/OSPO trajectory: - Purpose: Analyze how each article advances open-source advocacy, contributor engagement, sustainable funding, and education in the WordPress ecosystem while supporting your goal of becoming an OSPO director. - Use this prompt for future articles: 1) Relevance: Explain how the article’s findings inform open-source policy, contributor health, or funding models in WordPress/GPL ecosystems. 2) Adoption → Education: Identify 3 concrete educational interventions (e.g., workshops on Git basics, contributor pathways, secure OSS usage with SBOMs) aligned to the article’s insights. 3) Contributor Experience: Map 2 improvements to onboarding (docs, mentorship, first-issue labels) that reduce time-to-first-PR. 4) Sustainability: Propose a funding mix (sponsorships, collective funds, bug bounties, grants) prioritized by criticality and bus factor; include KPIs. 5) OSPO Readiness: Translate insights into OSPO policies: sourcing, compliance, SBOM, upstream-first, inner-source guidelines, and contribution time allocations. 6) Transparency & Inclusivity: State how to report metrics publicly (dashboards) and how to broaden participation (DEIB practices, non-code roles). 7) WordPress Focus: Connect to WordPress: list 3 core or ecosystem components benefitting from the article’s recommendations (e.g., performance, security, i18n). 8) Measurement: Define success metrics (e.g., PR throughput, maintainer response time, sponsor retention, security patch latency). 9) Communication: Draft a 150-word internal brief and a 150-word community post summarizing value to stakeholders. How this article aligns: - Advocacy: Quantifies OSS’s macro value to justify corporate sponsorships and contribution policies. - Contributor engagement: Highlights extreme value concentration, justifying maintainer support and contributor pipeline programs. - Education: Motivates curricula on dependencies, licensing, SBOMs, and responsible use/contribution. - OSPO path: Directly informs OSPO policy pillars (procurement, compliance, upstream strategy, funding). ## 🧪 Hypotheses: - H1: Firms with formal contribution policies (upstream-first, allocated time) achieve lower total cost of ownership than firms that only consume OSS. - H2: Sponsor funding targeted at the top 5% of value-creating maintainers reduces ecosystem security incidents more than diffuse sponsorship. - H3: Introducing structured onboarding and mentorship in high-value repos increases contributor retention and decreases maintainer burnout. - H4: WordPress sites adopting TypeScript-first build tooling experience lower defect rates and faster time-to-merge compared to vanilla JS-only pipelines. - H5: Publishing SBOMs and dependency health metrics correlates with improved procurement and reduced remediation costs. ### 📊 Methodology: - Quasi-experimental: Difference-in-differences on firms before/after OSPO formation for TCO and incident rates. - Network analysis: Identify centrality and risk in dependency graphs; correlate sponsorship intensity with incident frequency. - Field experiments: A/B test onboarding changes (templates, labels, mentorship) in selected WordPress repos; measure time-to-first-PR and retention. - Observational cohorts: Compare TypeScript vs. JS-only projects on defects/time-to-merge using GitHub and issue trackers. - Data sources: GitHub/GHTorrent, OpenSSF Scorecard, deps.dev, OSV, WordPress Trac/GitHub, SBOMs (CycloneDX/SPDX), corporate finance proxies. ### ❓ Questions: - What is the marginal ROI of sponsoring a critical maintainer versus funding general OSS events? - How does value concentration affect systemic risk in the WordPress dependency graph? - Which non-code contributions most relieve maintainer bottlenecks? - How should OSPOs prioritize upstream engagement when budget-constrained? - Can goods-basket pricing for OSS be adapted to measure specific WordPress plugin/theme categories? ### 🔮 Future Research: - Fine-grained WordPress ecosystem valuation (core vs. plugins/themes; PHP/JS split). - Maintainer labor economics: pay scales, burnout indicators, optimal sponsorship structures. - Security externalities: quantifying avoided breaches via proactive maintenance funding. - Licensing and dual-licensing impacts on adoption and sustainability. - Regional human capital pipelines and their effect on contribution concentration. ### 💡 Implications: - Policy: Incentivize corporate contributions via procurement preferences, grants, or tax credits for funding critical OSS. - Practice: OSPOs should implement upstream-first polices, sponsor top-risk dependencies, and publish transparency dashboards. - Education: Standardize contributor education on Git, reviews, security, and licensing in WordPress community programs. ### 🧠 Learning Styles Assessment: - Readability level: Upper undergraduate to early graduate. Dense methods; accessible executive framing. - Visual (spatial): - Present: Figures on language/value distributions; Lorenz curves; a table of language buckets. - Improve: Add dependency graphs, flowcharts of methodology, and dashboard-style summaries. - Aural: - Present: None. - Improve: Provide an audio summary and short explainer podcast. - Verbal (linguistic): - Present: Clear abstract and structured narrative; citations; definitions. - Improve: Add more examples tying metrics to real projects (e.g., WordPress core). - Physical (kinesthetic): - Present: None. - Improve: Include a reproducible notebook to compute value for a given repo or portfolio. - Logical (mathematical): - Present: COCOMO II, cost logic, Lorenz curves; rigorous methodology. - Improve: Publish formulas and a calculation appendix with step-by-step exemplars. - Social (interpersonal): - Present: Community-oriented implications. - Improve: Add discussion prompts and links to forums for debate and replication. - Solitary (intrapersonal): - Present: Clear sections for individual study. - Improve: Reflection prompts about organizational OSS posture. - Naturalistic: - Present: Limited. - Improve: Use sustainability analogies (commons governance) to contextualize OSS stewardship. ### 📊 Accessibility Assessment: - Screen Reader Compatibility: As a PDF working paper, semantics may be limited. - Improve: Provide accessible HTML, tagged PDF, alt-text for all figures. - Keyboard Navigation: Not applicable to static PDF; HTML needed. - Improve: Ensure full keyboard navigation on a web version. - Contrast and Readability: Academic formatting likely fine; check figure color palettes. - Improve: High-contrast figure variants; larger labels. - Text Resizing: PDF limited. - Improve: Responsive web layout with scalable fonts and downloadable datasets. ### 🌍 DEIB (Diversity, Equity, Inclusion, and Belonging) Assessment: - Cultural Relevance: Global framing; could add more regionally diverse case studies. - Improve: Include examples from Global South ecosystems and non–English-first communities. - Inclusive Language: Generally neutral; jargon-heavy. - Improve: Glossary for non-specialists; define cost models and datasets plainly. - Neurodiversity Support: Long dense sections. - Improve: More subheadings, bullets, summaries, and callout boxes. - Representation: Limited discussion of contributor demographics. - Improve: Add diversity statistics and targeted recommendations to broaden participation. - Psychological Safety: Neutral. - Improve: Include community codes of conduct references and safe-reporting guidance. ### ✅ Logical validity: - Tone: Analytical, neutral, evidence-driven. - Strong reasoning: - Appeal to Evidence: Integrates two large-scale usage datasets and established cost models; strengthens external validity. - Causal Reasoning (counterfactual): “World without OSS” is explicit; acknowledges assumptions; improves clarity of inference. - Logical Flow: From problem to data to methods to results to implications; coherent sequencing. - Coherent Counterarguments: Addresses double-counting concerns and sampling limits; uses robustness checks (language buckets, goods basket). - Ethical Reasoning: Frames OSS as a public good requiring stewardship, not just consumption. - Potential weaknesses/fallacies: - Correlation vs. Causation: Demand-side value is a modeled counterfactual; not observed causality. Improve by sensitivity analyses and scenario modeling. - Sampling Bias: Census top-2,000 excludes long tail; may undercount value. Improve by extrapolation methods with uncertainty bounds. - Measurement Error: Mapping packages to repos and bot filtering may introduce noise. Improve by cross-validating with additional datasets (e.g., deps.dev, OpenSSF). - Suggestions: - Publish code and reproducible datasets. - Add error bars and confidence intervals on headline estimates. - Expand to non-web outward-facing OSS beyond JavaScript where feasible. 🔍 DARVO Analysis Prompt - Deny: Not present. The paper doesn’t deny issues; it surfaces limitations candidly. - Attack: Not present. No disparagement of other researchers or communities. - Reverse Victim and Offender: Not present. The narrative does not portray consumers as victims; it emphasizes shared responsibility for a public good. - Notes: Tone is academic and solution-oriented; no manipulative rhetorical cues consistent with DARVO. ### 🔍 SEO Evaluation: - Keywords: - Present and natural: “open source software,” “demand-side value,” “supply-side value,” “COCOMO II,” “software composition analysis,” “BuiltWith,” “Census II,” “GitHub.” - Improve: Add long-tail terms like “OSS economic impact,” “maintainer sustainability,” “OSS funding models.” - Meta Description: - Recommendation: “New research estimates OSS’s supply-side value at $4.15B and demand-side value at $8.8T, showing firms would spend 3.5× more on software without open source.” - Title Tag: - Clear; consider keeping under 60 characters: “The Value of Open Source Software: $8.8T Demand-Side Impact.” - Headers: - Use H2/H3 with keywords: “OSS demand-side value,” “COCOMO II costing,” “GHTorrent developer contributions.” - Content Length: - Sufficiently long and detailed; avoid redundancy. - Internal/External Links: - Add internal links to related posts on OSS sustainability, WordPress contribution guides. - External: Link to HBS paper, Census II, Octoverse, OpenSSF Scorecard. - URL Structure: - Suggested: /value-of-open-source-software-demand-vs-supply - Image Optimization: - Provide alt text for charts (language distribution, Lorenz curve). - Compressed SVG/PNG with descriptive filenames. - Mobile Optimization: - Ensure responsive tables/figures; lazy-load images; optimize CLS/LCP. - Engagement: - Add CTAs: “Sponsor a maintainer,” “Start contributing to WordPress,” “Assess your OSS dependency risk.” - Schema Markup: - Article schema; optional FAQ schema for common OSS valuation questions. - Social Sharing: - Open Graph/Twitter Card with concise summary and key stat (“$8.8T demand-side value”). ## 🎯 Conclusion: This research delivers one of the most comprehensive measurements of OSS’s economic value to date. By pairing usage data from millions of firm contexts with rigorous cost modeling, it demonstrates that the replacement value of OSS to businesses is orders of magnitude larger than recreate-once costs—$8.8T vs. $4.15B—implying firms would otherwise spend ~3.5× more on software. The outsized concentration of value among a small set of languages and contributors underscores the urgency of sustainable funding, contribution policies, and maintainer support. For practitioners, OSPOs, and the WordPress community, the message is clear: investing in upstream health is not philanthropy; it is prudent risk management and a direct driver of productivity. <!-- deep-read:sections end --> ## Highlights - Value of Open Source Software ([View Highlight](https://read.readwise.io/read/01hmpr7vwh95c8avbsb51v0f3b))