Open Source Drives Small Business

Open-source software is a key driver for small business in the U.S. and contributes an enormous amount to the economy, perhaps to the tune of $1 trillion in economic output.

PORTLAND, Ore. €” The open-source community creates tremendous value for the U.S. economy, driving small and midsize businesses (SMBs) and empowering entrepreneurs, according to a top open-source supporter.

At the O€™Reilly Open Source Convention 2012 (OSCON) here, Tim O€™Reilly, founder of O€™Reilly Media, exhorted open-source developers to €œwork on stuff that matters€ and to create more value than you capture.€ Indeed, this was O€™Reilly€™s mantra in a talk, entitled €œThe Clothesline Paradox: How Sharing Economies Create Value.€ O€™Reilly lauded open-source developers for helping make the economy better while also creating a richer, fairer world.

€œAn economy is an ecosystem; if you take more out than you put in, the economy fails,€ he said as he displayed a slide that showed individuals that did not follow these principles, including Bernard Madoff and Charles Ponzi, who became famous for the €œPonzi scheme€ to defraud investors. O€™Reilly followed that slide with one featuring Internet pioneers Vint Cerf, Tim Berners-Lee and others, as well as language developers such as Brendan Eich, Guido van Rossum and Yukihiro €œMatz€ Matsumoto, along with others, saying they understood the concept of putting more in.

O€™Reilly then displayed yet another slide that included several individuals who created companies that took advantage of open-source such as Mark Zuckerberg, Steve Jobs, Larry Page, Sergey Brin and Bill Gates.

€œYou may be a bit surprised to see Bill Gates on that list,€ O€™Reilly said. €œBut of course he exploited the Internet just as much as Google or Facebook. For those of you who were around the industry in the early 90s when Microsoft was running out of gas, they came up with this idea named Bob€¦ But then came the Internet, and they did Windows 95 and had another 10-year run on the backs of the Internet and open source.€™

O€™Reilly noted that the open-source community knows that it has created all this value that other people have built upon. €œThere€™s a huge downstream effect,€ he said. €œThe value of open source is captured in the economy, where millions of people are using open source.€

O€™Reilly then announced a study his company did with Endurance International Group€™s (EIG) Bluehost Web hosting business that focused on the impact of open source on small business. Bluehost provides hosting services for more than 2 million customers, most of them small and midsized businesses. The Bluehost data showed that 60 percent of Web hosting usage is by SMBs, 71 percent, if you include nonprofits. Only 22 percent of hosted sites are for personal use. Also, 75 percent of customers build their own site using simple site-builder tools. Another 6 percent have it built by a family member. Only 13 percent use professional Web developers.

Moreover, the majority of the Websites are informational; only 14 percent have an online store€”including nonprofits that take donations online. Nonetheless, nearly 20 percent of businesses in the survey say they derive more than 50 percent of their revenue from their Website. The majority of hosted businesses are very small. Only 15 percent have revenue in excess of $50,000 a year, yet collectively, O€™Reilly said the research indicates that these businesses represent $1 trillion of economic output.

€œOpen source drives small business,€ said John Mone, executive vice president of technology and program management at EIG. €œOpen source reduces or eliminates the friction of starting a small business. Our business was built almost entirely on open source.€

Mone then compared the startup costs in 2000 versus 2012. In 2000, a startup might expect to pay around $4,300 for infrastructure software alone and $20 a month for hosting. Today, the infrastructure software is free and the Web hosting account might go for $5 a month.

Mone said those who have been able to benefit from open source have a responsibility to give back. €œWhat is the giveback? Our responsibility is this sustained commitment to the community€”to help projects and enhance exposure to projects.€

€œYou gain status by the value you create,€ O€™Reilly said. €œThis community figured that out a long time ago and is the beacon for the future. Thank you for showing the way,€ he added.