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Impact of open source in the total cost of ownership

An analysis of business models is not, per se, enough to justify an interest in open source software in companies not directly related to the development, consulting or maintenance of software. The presence of new opportunities could not be a reason sufficient to extend this model to other more traditional development environments, and especially to companies which main business is not directly related to information technologies (although it could be based on them). For this reason, in this section we are including a simple analysis of the impact of open source on total cost of ownership for a company using information technology. A more detailed analysis can be found in [21].

Total cost of ownership (TCO) is a widely used parameter to measure the effective cost of a software or hardware/software combination within an organization. It tries to capture all the real costs of deploying an information technology system, at all stages. However, it does not try to measure the advantages gained by using a given information technology, for which usually another parameter, the return on investment (ROI) is used.

In this section, we will discuss how the use of open source software compares in terms of TCO with proprietary systems. We do not include any discussion on the impact on the ROI, since it depends on the quality of the information technology system, and its suitability for the goals and the business of the of the organization where it is used. Therefore, assuming similar quality and suitability, whether the system includes open source software or not should not have any impact on the ROI.

Total cost of ownership is the effective, combined cost of acquisition and deployment of an information technology throughout all its perceived useful life. We can subdivide this life in several stages: information gathering, acquisition or creation, deployment, training, common use and maintenance, and abandon or transition to a new technology. Let's discuss all of them:

As a conclusion, it can be said that of the many stages that are to be considered for TCO estimation, in some of them there are no significant differences due to the open source nature of the software, and when these differences are against open source, they are hoped to become negligible as the model matures and is used more and more. However, there are at least three stages (acquisition, maintenance and transition) where using open source systems provides clear advantages.


... systems16
Examples of these systems are the autoconf engine from the Free Software Foundation, and the RPM and DEB packaging systems from Red Hat and Debian.

next up previous contents
Next: The big (macro-economic) picture Up: Economics of open source Previous: New economic models: Internal   Contents
Jesus M. Gonzalez-Barahona