On Open Source

Brian Wei -

After playing around with some open source software (OSS), I wanted to dive a bit deeper into understanding its history and the state of the market today.

A Summarized History:

What is OSS?

OSS is software with source code that anyone can inspect, modify, and enhance. The key principles of open source include:

  1. Transparency: Source code is publicly accessible.
  2. Collaboration: Developers can contribute to projects, improving and extending them.
  3. Meritocracy: Contributions are evaluated based on their merit, not the contributor's credentials.
  4. Community: Open-source projects thrive on active, engaged communities.

OSS has evolved from a niche, academic practice to a cornerstone of modern software development, driving innovation and fostering a collaborative global community.

State of the Market

The adoption of OSS is pervasive and significant across various sectors and industries.

  • One 2023 survey shows that 90% of businesses surveyed use open source in some capacity, with OSS composing at least 70% of the average application’s codebase.
  • Another estimate in 2015 from inputs from over 1,000 C-suite and senior IT professionals reveals that ~78% of companies rely on OSS for at least part of their operations.

Today’s use of OSS in the enterprise includes IT infrastructure modernization, application development, and application modernization.

Moreover, the adoption of OSS is clearly growing.

  • Large enterprises, such as Netflix, Goldman Sachs, and Target, have established Open Source Program Offices (OSPOs) to manage and strategize their use of open source software, indicating its critical role in their operations. OSPOs act as the center of competency for an organization’s OSS operations, such as setting policies around code use, distribution, selection, auditing, and contributing or providing education to internal and external stakeholders involved in open source activities.
  • In 2023, GitHub saw the largest number of first-time open-source contributors.
  • In 2022, Red Hat’s “The State of Enterprise Open Source” reports that OSS will gain 8% in an organization’s share of type of software used. In addition, 80% of IT leaders expect to increase their use of enterprise OSS for emerging technologies, including AI/ML, edge computing, containers, and serverless computing.
Source: The State of Enterprise Open Source, Red Hat

Drivers:

OSS is particularly popular for its cost-effectiveness, flexibility, and the ability to customize solutions to meet specific needs.

  • The economic value of OSS is 1-2x the cost of its use.
  • Using OSS can influence the development of features within an enterprise, allowing customizations to be built.
  • There is a shift in the perception of the security of OSS. From Red Hat, 89% of IT leaders believe that enterprise open source is as secure or more secure than proprietary software. The surveyed IT leaders report that their team can use “well-tested open source code” in their internal applications.

Challenges:

Despite the high usage rates, there is a notable gap in contributions back to the open-source community. While many companies benefit from open source, fewer contribute code or resources to its development and maintenance. Some challenges to OSS adoption include:

  • Lack of Official Support: OSS relies on community support, which can be a challenge for enterprises that need guaranteed, prompt assistance. At the worst case, OSS projects can be abandoned if the community loses interest or the primary maintainers move on to other projects.
  • Lack of Training: Employees may need additional training to use and maintain OSS.
  • Complex Integrations: Integrating OSS with existing systems and proprietary software can be complex and time-consuming.

Companies that Commercialized with OSS

There exist companies that sell OSS as a managed service. The thesis here is that venture-backable and profitable businesses can be built leveraging existing open-source solutions. Below are some examples:

Another great resource to view is Runa Capital’s ROSS Index, which features top open source startups by GitHub stars growth of their repositories.

In addition, there are plenty of precedent transactions that highlight the critical role OSS plays in the technology landscape as major tech companies integrate these open source solutions into their broader business models.

Open-source software is a fundamental component of modern business operations, with high adoption rates across various sectors due to its numerous benefits. However, there is still room for improvement in terms of contributions back to the open-source ecosystem to ensure its sustainability in the long run.