European companies are advised to FLOSS well

Net Results:A fifth of all software used in Europe by public and private organisations - a total €22 billion investment - comprises so-called Free/Libre or Open Source Software (FLOSS), software developed by amorphous groups of developers who freely make their source code available to anybody.

It's an astonishing set of figures. While some FLOSS applications, such as the operating system Linux or the server software Apache, have long since shed their geeks-and-sandals image for, if not exactly a business suit, then at least, neatly-pressed chinos - I don't think most people (perhaps excluding system administrators) realise the extent to which FLOSS has permeated the mainstream.

I sure didn't, and I've followed this interesting market segment for many years and written about various aspects of it many times. But the EU has just released an extensive study that looks at the value of FLOSS (the more inclusive term it prefers to 'open source') and tries to put some figures and structure on to an area that can be difficult to quantify.

I hadn't realised the degree to which Europe leads in driving FLOSS development and adoption, but as the report notes: "While the US has an edge in large FLOSS-related businesses, Europe is the leading region in terms of globally active FLOSS software developers, and leads in terms of global project leaders, followed closely by North America."

Medium and large businesses are the biggest users of FLOSS in the private sector in Europe, demonstrating that it is a firm option for many companies.

The report also notes that almost two-thirds of FLOSS software is still written by individuals; firms contribute about 15 per cent and other institutions another 20 per cent. What does that mean in terms of economic impact? The code base for FLOSS - which has doubled every 18-24 months for the past eight years - would cost firms about €12 billion to produce internally as bespoke applications.

The report goes on to note: "This existing base of FLOSS software represents a lower bound of about 131,000 real person-years of effort that has been devoted exclusively by programmers. As this is mostly by individuals not directly paid for development, it represents a significant gap in national accounts of productivity. Annualised and adjusted for growth, this represents at least €800 million in voluntary contribution from programmers alone each year, of which nearly half are based in Europe."

But aren't all those free hours, and the open source model overall, a threat to proprietary software jobs? That's an argument that is often heard from proprietary software manufacturers.

The report authors say, not so: proprietary packaged software firms account for under 10 per cent of jobs for software developers in the US, while what the report calls "IT user firms" account for over 70 per cent of developers employed at a similar salary and skill level.

"This suggests a relatively low potential for cannibalisation of proprietary software jobs by FLOSS, and suggests a relatively high potential for software developer jobs to become increasingly FLOSS-related," states the study.

It concludes that while the US has the greatest number of FLOSS-related businesses overall, Europe has supplied a greater level of individual contributions from developers, which "has led to an increasing number of globally successful European FLOSS small- and medium-sized enterprises (SMEs)." In addition, FLOSS-related services could reach a 32 per cent share of all IT services by 2010, and the FLOSS-related share of the economy could reach 4 per cent of European GDP by 2010. Thus, within Europe, "FLOSS can encourage the creation of SMEs and jobs".

Coincidentally, as I was reading through this report, I came across an article discussing how many SMEs were finding either a firm business plan - or were being revitalised - by adopting an open source strategy in part or whole. Among the companies was Iona, whose recent recovery chief executive Peter Zotto credits to Iona's embracing of open source.

The flip side could be Red Hat - which found former partner Oracle undercutting its business model last year when the database giant decided to offer free downloads of Red Hat Linux and supply support at a lower cost that Red Hat did itself. The moral? Grow too successful in the FLOSS sector, and the proprietary companies will be considering whether you'd make a nice lunch entree.

What are some of the challenges for FLOSS across the EU? Europe has had a traditionally low rate of ICT investment and also has a low rate of FLOSS adoption in big industry in comparison to the US. There are some policy moves afoot in some regions to restrict some of the business models and bolster older, proprietary-software based models, warns the report.

It concludes by making a number of policy strategy suggestions for removing implicit or explicit supports for proprietary software in the European market.

Among them:

•Avoid penalising FLOSS in innovation and R&D incentives, public R&D funding and public software procurement that is currently often anti-competitive

•Support FLOSS in pre-competitive research and standardisation

•Encourage partnerships between large firms, SMEs and the FLOSS community

•Provide equitable tax treatment for FLOSS creators: FLOSS software contributions can be treated as charitable donations for tax purposes

•Explore how unbundling between hardware and software can lead to a more competitive market and ease forms of innovation that are not favoured by vertical integration.

•It's an ambitious wish list and the EU has shown itself to be an uncertain quantity when it comes to backing, or even providing basic support for, FLOSS. View the report on: http://tinyurl.com/ycgwe9

•It should provide plenty for the Eurocrats to ponder.