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Spolsky Applies Microeconomics to OpenSource Software

On his Joel on Software web site, Joel Spolsky, a former Microsoft manager discusses the economics of OpenSource software in his recent Strategy Letter V. In this article, he tries to explain the motivation of participants in the OpenSource software market in terms of substitutes and compliments, as defined in classic microeconomics. He suggests that OpenSource enterprise software can be considered a complement to computer hardware (in some cases), or consulting services (in more cases). This is one reason why IBM is investing so heavily in OpenSource projects like Linux.

The article also spells out in very simple terms what a Total Cost of Ownership calculation ought to include for OpenSource software. For example, if a new Linux kernel obsoletes a large class of hardware device drivers, that would add dramatically to the TCO. Too often, OpenSource advocates claim that such incompatibilities have no cost to the end user.

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