Estimating value of opensource

I came across this Linux Foundation press release via the 451 CAOS Theory blog. Headlined Estimating the Total Development Cost of a Linux Distribution, I had no choice but to read it. And it makes interesting reading.

I gave the report a quick once-over; initial reactions were not good, I was up in arms about a number of things, three in particular. For one thing, the report relies on replacement cost as a basis for valuation; even if I were comfortable with the way that the replacement costs were calculated, I would always less comfortable with the replacement-costs-alone approach to valuation. A second issue, openly admitted to in the report, is to do with the use of  Source Lines of Code (SLOC), and the quantity-not-quality risk that comes with it. And the third issue, also alluded to in the report, is the use of COCOMO (COnstructive COst MOdelling) in an opensource context, coming as it does from strong proprietary tools.

But I decided to set all these reactions aside, and sought to concentrate on what I could learn from the report. Three key things occurred to me:

1. We still haven’t really “got” the Because Effect. When someone says “The Linux operating system is the most popular open source operating system in computing today, representing a $25 billion ecosystem in 2008″, I start worrying. After all, Google alone is worth a tad more than $25 billion, even at today’s prices. When the someone in question is the Linux Foundation, I worry a little more. Google’s valuation is at least in part due to its operating costs being what they are, based on extensive use of opensource software.

2. We still haven’t really “got” global sourcing. Twenty years after the offshore industries began, we’re still using Western proxies for pricing labour, and wrap rates that appear to be based on traditional in-house approaches rather than partnered and offshored models.

3. We still haven’t really “got” the implications of community development. This, despite the work done by people like Eric von Hippel and Yochai Benkler, despite the prodigious outputs of many people in looking at, analysing, reporting on and summarising what’s happening in this field. Opensource is a well-established exemplar of community-based development, and we have to get our heads around the way this is valued, both in enterprises as well across the industry as a whole.

Maybe I shouldn’t have started those three points with “we”. Maybe it’s me. What is clear to me is that I need to learn a lot about estimation and valuing and costing and pricing in a global, community-based, commodity-enabled open platform world.

And studies like the one I just finished reading will help me get there, as I begin to see what works and what doesn’t, what is known, what answers aren’t forthcoming as yet. So thank you Linux Foundation, thank you Amanda McPherson, Brian Proffitt and Ron Hale-Evans. At the very least you’ve given me stuff to critique, stuff that I can point to and say “that works for me, that doesn’t work for me”. But in real fact you’ve given me a lot more, stuff to think about, stuff to work on.

So I will give the report another, slower read, and revert to the authors with comments and questions. Maybe you’d like to do the same.

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