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An analysis of the economic advantages caused by the social benefits of Open Source Software.

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Economic Advantages of the Social Benefits of Open Source Software

Discuss how the social benefits of a company’s contributing to open source software can present economic advantages.

Since Netscape released the source code of Netscape Communicator 4.0 in 1998, the technology industry has been engrossed in discussing the relationship between for-profit companies and open source. It seems there will be a never-ending discussion surrounding companies publishing code for which they have no copyright. There is extensive research in this field on the social and economic aspects of open source. Research on the social aspects of open source tends to focus on the morality of open source. There is not much research on how the social aspects of open source cause economic advantages. It is economically advantageous for a company to contribute to open source because it improves its public image, its attractiveness to potential employees, employee retention, and employee productivity.

James Pearce, Head of Open Source at Facebook1, stated in a Facebook meeting that Facebook has “an altruistic and ideological obligation to” open source its projects because “Facebook was built on open source… So, we’ve always had that moral obligation to give back.” His outlook—that if a developer takes advantage of open source software, he or she should reciprocate others’ generosity by contributing to open source—is shared throughout2 the developer community. Without delving deeply into why giving back to open source is moral, as has been done before, it can be simplified with the following analogy: open-source is to software development as “give-a-penny-take-a-penny” jars are to grocery shopping. If an entity takes and never gives, it takes advantage of others’ generosity. If it gives and takes the same amount, it demonstrates basic morality by not taking advantage of others’ generosity, even if taking advantage of that generosity offers an economic gain. If it gives notably more than it takes, it is more than moral, it is altruistic—a benefactor of the common good. The more an entity gives, the more morality and generosity it displays. Over 97 percent of companies “use [open source software] in any way”3 and “on average, open source code comprises 35 percent of a commercial application.”4 According to a 2010 survey by Accenture, only 29 percent of companies contribute to open source. Thus, 68 percent of companies are amoral, perhaps immoral, “takers.” Because such a large portion of companies abstain from giving back to open source, any company who publishes at least one percent of its code as open source joins the less than a third of companies which have put at least one penny in the jar from which they have taken, on average, thirty-five. And, because its penny is publicly available on the internet, everyone knows that it has shared a penny. Contributing to open source software presents companies with the opportunity to improve their public image and social responsibility. The social benefits of contributing to open source also cause economic advantages.

A company’s heightened social responsibility from contributing to open source attracts and retains productive, talented employees because of how a company’s contributing to open source indirectly appeals to developers’ job priorities and because of Millennials’ value for corporate social responsibility.

There is a great, and increasing, value for corporate social responsibility in the current developer job market. According to a Stanford Graduate School of Business study, “Corporate Social Responsibility Reputation Effects on MBA Job Choice,” ninety percent5 of graduates from business schools in Europe and North America “prefer working for organizations committed to social responsibility.” This statistic is particularly important because it surveys only Millennials, indicating that the value for corporate social responsibility may grow as Millennials become adults. It also indicates the value of corporate social responsibility among developers in the current job market. According to Stack Overflow’s 2016 Developer Survey Results, 77.2% of developers are 35 or younger6. Extrapolating from the Stanford study, 69.5% of developers “prefer working for organizations committed to social responsibility.” Should a company seek to attract developers, it is increasingly important that it display social responsibility.

Contributing to open source helps companies fulfill the corporate social responsibility that many young people look for when searching for employment. Per the same study, given twenty-one options, 41.8% of developers chose “Company Culture” as a priority and 35.9% of developers chose “Build[ing] Something that’s Significant” as a priority when looking for employment. Given the intrinsic altruistic effects of a company’s contributing to open source software, including contributing to collective wisdom by allowing external developers to learn from the software’s code, promoting transparency7 between corporations and consumers, and enabling free use of the software, it is logical that generosity would permeate the company culture. Likewise, all open source products are “significant” for, at minimum, the aforementioned positive social effects of open source software.

A company’s neglecting to contribute to open source software can harm its perception by developers, negatively affect its company culture, and hinder the significance of its product. As discussed in the previous section and elaborated upon in the footnotes, there is an overwhelming belief among developers that companies which use open source software have a moral obligation to contribute to open source. Unless a company lies in the less than three percent8 of companies which abstain from using open source software, if it does not contribute to open source, it fails the developer-constructed moral obligation to reciprocate open source developers’ generosity. This damages its social perception. Accounting for the previous logic where contributing to open source made for a more open and generous company culture, it follows that a company which does not contribute to open source would have a less socially-minded company culture than they would if they did contribute. Following the logic where contributing to open source enhances products’ significance, it follows that failing to do so hinders the significance of the product. Per the Stanford and Stack Overflow surveys, these effects decrease the company’s appeal to potential employees. This section discussed how contributing to open source attracts new employees. Some effects of the heightened social responsibility more directly assist employee retention.

There is an incredible value for employee retention among technology companies primarily because of the tech industry’s high employee turnover rates and the high costs of replacing employees. According to Stack Overflow’s 2016 Developer Survey, 14.8% of respondents stated they were “actively looking for a new job” and 63.1% stated they were “not actively looking, but… open to new opportunities.” Note that 67.8% of respondents were employed full-time, indicating a large amount of employed developers are interested in leaving their current job. Many of these developers do leave for new jobs. Per PayScale’s recent employee turnover report, the employee turnover rate among Fortune 500 companies in the technology industry is the highest among all industries. Amazon and Google, both well-known for the measures they take to retain employees, fall in the top five for lowest median tenure, at one year and 1.1 years, respectively. “Retaining Talent,” a 2008 study by the Society for Human Resource Management, predict that the average cost for replacing a salaried employee is six to nine months of salary. Thus, these companies lose considerable capital when employees leave. To combat these high turnover rates, technology companies go to extraordinary lengths to increase employee retention. Their methods, surprisingly, do not lie in promising year-end bonuses and other financial incentives, but in maintaining employee’s happiness. In an interview with Bloomberg, Laszlo Bock, the Senior Vice President of Google’s People Operations (Human Resources), stated that “People don’t stay for the money” and noted that more than a third of Google’s first 100 employees have not left despite coming into fortunes after Google’s IPO. He stated that the reason people stay at Google is because “of the quality of the people they work with” and “the feeling that the work they do is meaningful.”9 Google’s People Operations’s bases its initiatives off of the research of Google’s People Analytics branch, which “uses a data-driven approach to inform your people practices, programs and processes.” Because of this and People Operations’s focus on improving employee happiness10, improving employee happiness increases employee retention. Studies also show that improving employee happiness increases productivity.

Contributing to open source increases employee productivity by creating an attractive company culture and augments products’ significance. Happiness has become of utmost importance across tech companies as new studies show that happiness directly correlates to productivity. One such study by University of Bozen-Bolzano titled “Happy software developers solve problems better: psychological measurements in empirical software engineering” establishes that “positive affective states of software developers are indicators of higher analytical problem-solving skills” and “offer[s] an initial support for the claim that an increase in productivity is expected by making software developers happy.”

Because contributing to open source attracts developers (particularly young developers), contributing to open source gives companies a more enthusiastic applicant pool. An enthusiastic applicant translates, logically, to a happy employee who will enthusiastically work at an open source company. By contributing to open source, a company attracts happy, enthusiastic workers. Per Google’s research, there is a direct correlation between employee happiness and employee retention and productivity. Increasing employee retention is economic because of the high costs of replacing employees, as shown by the Society for Human Resource’s study. Increasing productivity is self-explanatorily economic. It is economically advantageous for a company to contribute to open source because it improves its public image, its attractiveness to potential employees, employee retention, and employee productivity. With the increasing value for corporate social responsibility, it seems these benefits will continue to increase in importance.

Works Cited:

Footnotes

  1. Facebook is recognized as one of the largest corporate contributors to open source. ↩

  2. In a 2012 study by Brunel University and the Norwegian School of Information Technology, when asked “if there was a sense of moral obligation to contribute to open source,” an Accenture employee stated “Be a good citizen, contribute to open source*.*” An Arktekk informant similarly stated, “If you are using open source software, you should also contribute.” Redpill Linpro responded with “We are honoured to contribute to open source.” ↩

  3. According to Black Duck Software’s 2016 Future of Open Source Survey ↩

  4. Ibid. ↩

  5. A description of the study’s results can be found at this Huffington Post article. ↩

  6. Anyone aged 36 or younger is a Millennial. People born after 2002 are a part of Generation-Z but that is not relevant for this paper’s purposes. ↩

  7. Because users can view the code of open source software, releasing software as open source establishes a company as moral, enhancing their social perception. It establishes that they respect users’ privacy and do not wish to encroach upon it for economic gain, as closed-source competitors may not. ↩

  8. This is extrapolated from the Black Duck survey, which states that 97% of companies “use [open source software] in any way.” ↩

  9. Note the similarity between Bock’s “the quality of the people they work with” and “the feeling that the work they do is meaningful” and the Stack Overflow Developer Survey’s denoting “Company Culture” and “Build[ing] Something that’s Significant” as two of developers’ top priorities in job searching. ↩

  10. Here and here are articles elaborating on some of Bock’s work, including his designing lunch line wait times to optimize the time one could “meet new people” without “wast[ing] time.” ↩

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An analysis of the economic advantages caused by the social benefits of Open Source Software.