The Value of Open Source Software ![rw-book-cover](https://cdn.ssrn.com/ssrn-global-header/11589acb53bc518aa22929bf19add113.svg) ## Metadata - Author: [[Hoffmann, Manuel]] - Full Title: The Value of Open Source Software - Category: #articles - Summary: Open source software (OSS) is a non-pecuniary product that is difficult to assess in terms of value. This is due to its non-pecuniary nature and lack of centralized usage tracking. However, a study has been conducted to estimate the supply-side and demand-side value of widely-used OSS. The supply-side value, which is the cost to recreate the software, is estimated to be $4.15 billion, while the demand-side value, which is the cost firms would need to spend if OSS did not exist, is much larger at $8.8 trillion. The top six programming languages contribute to 84% of the demand-side value, and only 5% of OSS developers create 96% of the demand-side value. - URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4693148 ##### 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. Hoffmann, Manuel and Nagle, Frank and Zhou, Yanuo, The Value of Open Source Software (January 1, 2024). Harvard Business School Strategy Unit Working Paper No. 24-038, Available at SSRN: <https://ssrn.com/abstract=4693148> or [http://dx.doi.org/10.2139/ssrn.4693148](https://dx.doi.org/10.2139/ssrn.4693148), The Value of Open Source Software, Hoffmann, Manuel, 01hmjcm48ew3qbsdy0sfkdmdns.