Open Source and the Economy - The Benefits of the Recession for Open Source

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How the Recession Did a Favor to Open Source

While most people and companies suffer from the recession, there are also branches and individuals for whom the recession is good times. This might sound unfair but actually the reasons for this are more than fair – these branches, companies, and individuals know how to adapt to the shifts in demand during a recession and this is why they managed not only to survive but also to prosper at times when many established companies are barely alive.

Let’s take open source as an example. Open source is generally free software, though there are paid solutions. As a rule, open source applications are cheaper than their commercial counterparts simply because when you get the license for free, even if you have to pay for hardware, consultations, and other similar expenses, this costs much less.

When IT budgets are stringent, very often you have no choice but to get the cheaper alternative. This is where open source comes into the picture. In better economic times, many companies would buy a more expensive solution, no matter if it is better than its open source counterpart or not. Now, when IT spending has been cut to the bone, such luxuries are harder to be approved. This is why many companies are turning to open source.

The shift in demand trend affects open source companies in a very positive way. For instance, Red Hat reports a steady increase of revenue and profit for 2010 and for the first quarter of 2011. 20% increase in revenue on an annual basis is pretty impressive, especially during a recession. Red Hat is not the only open source company to see such an increase.

On the other hand, proprietary code companies are being hit by lower revenue and profit. This in turn means that their budgets for R&D of new products are affected in a negative way. This makes them even less competitive because when they can’t innovate, they are losing even their existing customer base.

What Will Happen with Open Source When the Recession Ends?

Everything has an end and even a recession, which seems endless and will sooner or later end. When this happens, we’ll hardly be sorry that the recession has ended and will hardly miss it. However, it is interesting to predict what will happen with open source then.

Since open source has long ago gone mainstream, there are no reasons to worry that when the recession ends it will lose from this. Even if open source manages to retain its present penetration, which according to a recent survey is “almost 70 percent of corporate customers say they are using Linux at the operating system layer, 65 percent are using open source at the database tier and about 60 percent are now using GPL-based programming languages”, this is not something to complain about.

It is quite possible that open source performs even better than that, after the end of the recession. IDC study predicts a steady increase for open source products by 2013 and this is not a groundless optimism. Only the future will tell if their forecasts come true or not.