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Why Open Source Is a Trillion-Dollar Engine and How We Can Keep It Running?
Open source powers 96% of all codebases and would cost $8.8 trillion to rebuild, yet 5% of developers create most of its value. That imbalance is fragile. Here is the economics of why engineers give their best work away for free, and what it would take to keep the system running.
Personal Journey with Open Source
As a software engineer, I have always been fascinated by Open Source Software (OSS). I have relied on OSS since my first "Hello World." I shipped products powered by community code at every job while contributing almost nothing back. That imbalance nagged at me, particularly when I worked alongside renowned OSS contributors on significant projects, such as the Linux Kernel, WineHQ, ROS 2, and a team I managed closely for a long time: the team behind the famous project in the automotive industry, iceoryx. Their talent amazed me, but I kept wondering: what makes brilliant engineers give away their best work?
A turning point in my career came when I joined Apex.AI at a very early stage, a company pioneering OSS‑based solutions for automotive safety‑critical applications. This idea was nearly unheard of at the time; yet, the founders' compelling vision of industrializing OSS spoke to me. The experience was exhilarating, and that energy carried the whole team. We took our solution to the next level and certified it to ISO 26262 ASIL-D, the highest safety level in the automotive industry.
Over time, we have recognized significant challenges within the OSS ecosystem in this domain. Nevertheless, my belief in OSS remained strong, fueling an ongoing curiosity about why engineers and businesses continue to use and contribute to it.
My perspective deepened during my Executive MBA studies at ESMT Berlin, where I was lucky to take a course on Open Innovation taught by Linus Dahlander. Although not exclusively about OSS, the course resonated strongly with my experiences, introducing me to valuable frameworks for understanding the broader ecosystem of Open Innovation in which OSS plays a crucial role. I highly recommend following Linus Dahlander and exploring his extensive research for anyone interested in OSS or Open Innovation. His insights have significantly shaped my understanding and unlocked a new domain for me, helping me understand why engineers love OSS.
Why Engineers and Businesses Embrace OSS
- Agility at its best: If we claim agility is the right way to develop software, OSS is Agile taken to its logical extreme, involving users as early as possible and enabling faster cycles of innovation.
- Intrinsic Motivation: Scientists and engineers are motivated differently from others. They are highly intrinsically motivated by autonomy, intellectual challenges, and the opportunity to showcase their work.
- Co-created solutions: Crowdsourcing ideas and solutions enables others to contribute to and augment your ideas, which is also highly rewarding.
- Collaboration: Since the 1990s, driven by the Internet and globalization, innovation has become increasingly interactive, rather than confined to small labs, and software has played a significant role in this shift.
- Learn faster: Open, transparent codebases create unparalleled learning opportunities. Studying real-world implementations accelerates professional growth and sparks novel ideas.
- Showcase expertise: Contributing to widely used projects builds a visible portfolio that enhances an engineer's reputation, strengthens their network, and opens new career paths.
- Ship at light speed: Collaborating across organizational boundaries exposes developers to diverse perspectives and best practices, often leading to more robust, secure, and maintainable solutions.
Economics & Hidden Risks of OSS
However, my studies didn't only answer this; they also touched on all business aspects related to it, such as why companies engage in open innovation, the challenges and benefits they encounter, the paradigm shifts they observe, and the business models evolving around open innovation.
A recent Harvard Business School working paper, The Value of Open Source Software, broadened my understanding by putting complex numbers on benefits that had long seemed intangible.
Although the paper does not draw a formal line between Open Source Software (OSS) and "Free" OSS (FOSS), a distinction worth noting because an open licence does not automatically mean zero cost, it nonetheless surfaces several critical insights:
- OSS is nearly ubiquitous: Found in 96% of all software codebases, with some commercial products comprising up to 99.9% OSS.
- Massive economic value: Firms globally would face an estimated cost of approximately $8.8 trillion if forced to rebuild all OSS from scratch.
- Low relative development cost: The original creation cost of widely-used OSS is estimated at only $4.15 billion, demonstrating an enormous disparity between initial investment and delivered value.
- Unequal contributions: Around 5% of OSS developers generate roughly 96% of total OSS value, creating substantial dependence on a small group of dedicated individuals.
- Hidden economic impact: Because OSS is freely distributed and replicable, its substantial value is typically overlooked in conventional financial metrics.
Drawing from this and related readings, several key takeaways stood out to me:
- Sustainability and Fairness (Tragedy of the Commons): Many critical OSS projects risk stagnation due to insufficient investment, reliance on volunteer efforts, and corporate free riding. The limited recognition and support for key contributors can significantly diminish their motivation.
- Labor Concentration and Vulnerability: With only about 5% of developers generating most OSS value, this concentration of effort creates vulnerabilities, particularly if larger companies recruit away these core maintainers.
- Security and Maintenance: Incidents such as the Heartbleed vulnerability in OpenSSL underscore the risks posed by underfunded and understaffed OSS projects, highlighting the need for sustained investment.
- Core OSS Ecosystems: A handful of programming languages and frameworks, notably Go, JavaScript, Java, C, Python, and TypeScript, dominate the OSS landscape. This suggests that industries such as embedded systems, mobility, and robotics have been slower to adopt and benefit from OSS.
- Under-recognized Economic Asset: Due to its intangible and cost-free nature, OSS remains largely invisible in official productivity and economic measures, posing long-term risks to companies heavily reliant on OSS without addressing these hidden externalities.
- Agendas Influence: Almost every major, well-maintained Open Source project is backed by a large company or foundation. While corporate sponsorship can provide crucial funding and development resources, the long-term intentions of the sponsoring organization are not always transparent.
The Path Forward
While OSS development in embedded and edge computing has traditionally lagged behind other tech sectors, we see recent initiatives are closing the gap. Collaborative projects like Eclipse Software Defined Vehicle (proudly a member), Eclipse IoT , and LF Edge are fostering greater community engagement and innovation.
Historically, real-time operating systems (RTOS) in these domains were predominantly proprietary. However, this is changing with initiatives like The Zephyr Project and Eclipse ThreadX , among other notable projects.
On the hardware front, open architecture from RISC-V International and Arm 's (our partner company) OSS initiatives, with platforms like WebAssembly (WASM), are promoting code portability across diverse devices.
Moreover, the explosive growth of AI is reshaping the OSS ecosystem. Together, these developments point to a more open and collaborative future in embedded technology.
Further reading
- Hoffmann, Manuel, Frank Nagle, and Yanuo Zhou. "The Value of Open Source Software." Harvard Business School Working Paper, No. 24-038, January 2024.
- Dahlander, Linus & Gann, David. (2010). How Open is Innovation?. Research Policy. 39. 699-709. 10.1016/j.respol.2010.01.013.
- Dahlander, Linus & Magnusson, Mats. (2005). Relationships between Open Source Software Companies and Communities: Observations from Nordic Firms. Research Policy. 34. 481-493. 10.1016/j.respol.2005.02.003.
- Related book: Cusumano, Michael A., Annabelle Gawer, and David B. Yoffie. The Business of Platforms: Strategy in the Age of Digital Competition, Innovation, and Power. Harper Business, 2019.
Originally posted on LinkedIn
FAQ
- How much economic value does open source represent?
- Open source is found in 96% of all codebases, and firms would face an estimated 8.8 trillion dollars to rebuild it all from scratch, while its original creation cost is estimated at only 4.15 billion dollars. That gap shows the enormous disparity between investment and delivered value.
- Why is the open-source ecosystem fragile?
- Around 5% of developers generate roughly 96% of total OSS value, creating heavy dependence on a small group. That concentration is vulnerable to the tragedy of the commons, corporate free riding, and larger companies recruiting away core maintainers.
- Why do engineers give their best work away for free?
- Engineers are intrinsically motivated by autonomy, intellectual challenge, and showcasing their work. Open source also offers agility taken to its extreme, co-created solutions, faster learning from transparent codebases, reputation building, and collaboration across organizational boundaries.
- What are the hidden risks of relying on open source?
- Critical projects risk stagnation from underinvestment and volunteer reliance, security incidents like Heartbleed in OpenSSL show the danger of underfunded projects, and OSS stays invisible in conventional economic metrics. Corporate sponsors also bring agendas whose long-term intentions are not always transparent.
Fadi Labib runs this field lab. 15 years in automotive, robotics, and embedded systems; ESMT Berlin EMBA. I give AI real engineering problems, then check its work. More about the lab →
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