Open Source Software Is Commercial


Posted: March 11, 2016 | By: Dr. David A. Wheeler

OSS is commercially developed and supported

OSS is commercial, even if we ignore US law and regulation.  The New York Times Everyday Dictionary (1982) says that “commercial” means either (a) “oriented to profit-making,” or (b) “of, pertaining to, or suitable for … [dealings, the buying and selling of commodities, or trade].”  Let’s start with the first definition.

Many for-profit companies make some or all of their money developing and/or supporting OSS, including Red Hat, IBM, Oracle, and others.  InformationWeek’s David DeJean, in his article, “Is Open-Source A Business Model? $500 Million Says It Is,” notes that Citrix paid $500 million for XenSource (maker of the OSS Xen hypervisor). IBM says that in 2001 it invested $1 billion in Linux, and that by 2002 it had already almost completely recouped that investment, suggesting some astounding returns on investment.  InfoWorld’s Savio Rodrigues reported on July 10, 2007, that venture capitalists invested $1.44 billion in OSS from 2001 through 2006.  Someone who uses “commercial” as the opposite of OSS will have trouble explaining why Red Hat is listed in the New York Stock Exchange (for example), since they focus on developing and releasing OSS.

For-profit organizations use or support OSS for many different reasons.  Some give away the OSS and sell the support (such as training, customization, and support/ maintenance).  Many use and support OSS as a support infrastructure for the product or service they actually sell, i.e., for cost avoidance by cost sharing.  Many for-profit organizations have realized the value of “commoditizing your complements,” that is, you’ll sell more of your product if things related to it (that you don’t sell) are cheaper.

Once you use the second broader definition of “commercial,” it is even clearer that OSS is commercial.  Economists often emphasize the difference between wealth and money.  Some OSS projects attempt to earn money (directly or indirectly), but nearly all OSS projects attempt to create wealth in the form of improved software. They attempt to create wealth via trade and dealings … a fundamentally commercial notion.

OSS developers give their users many more rights than proprietary products do, typically with the expectation that others are thus likely to contribute back to the project.  Thus, most non-profit OSS projects are actually trying to achieve financial gain – it just happens that they are trying to receive gains of additional or improved software instead of money.  As Linux kernel creator Linus Torvalds noted in a 2003 letter to SCO, the U.S. Code Title 17, Section 101 (the law that creates and defines copyrights in the U.S.) explicitly defines the term “financial gain” as including “receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works.”  Thus, while OSS projects may not receive money directly, they typically do receive something of value in return.  Ganesh Prasad’s “How Does the Capitalist View Open Source?” captured this concept nicely in May 2001.

The U.S. Court of Appeals for the Federal Circuit formally stated that there are economic considerations with OSS. In their ruling on Jacobsen v. Katzer (August 13, 2008), they said that “Open Source software projects invite computer programmers from around the world to view software code and make changes and improvements to it. Through such collaboration, software programs can often be written and debugged faster and at lower cost than if the copyright holder were required to do all of the work independently. In exchange and in consideration for this collaborative work, the copyright holder permits users to copy, modify and distribute the software code subject to conditions that serve to protect downstream users and to keep the code accessible… Traditionally, copyright owners sold their copyrighted material in exchange for money. The lack of money changing hands in open source licensing should not be presumed to mean that there is no economic consideration, however. There are substantial benefits, including economic benefits, to the creation and distribution of copyrighted works under public licenses that range far beyond traditional license royalties. For example, program creators may generate market share for their programs by providing certain components free of charge. Similarly, a programmer or company may increase its national or international reputation by incubating open source projects. Improvement to a product can come rapidly and free of charge from an expert not even known to the copyright holder. The Eleventh Circuit has recognized the economic motives inherent in public licenses, even where profit is not immediate….

Also, note that many OSS developers are now well-paid for their work.  Consulting company Bluewolf found that “the advancement of open source software is triggering an increasing need for specialized application developers … higher-end, more complex application development proves difficult to complete overseas … The rise of open source software in application development puts developers with a specialization in those technologies in a position to ask for a 30 or 40 percent pay increase…” [Eddy2008].  Provably 70% of all Linux kernel development is by developers who are being paid to do this work [Corbet2010], and the actual figure is probably much higher.


The most common antonym for OSS is “proprietary software;” other terms include “closed source,” “non-Free,” “non-OSS,” and “non-FLOSS.”  I tend to use “proprietary software” as the antonym, simply because it seems to be the most widely used and thus better understood.  Do not call OSS non-commercial, because nearly all OSS is commercial.

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