Open Source as a Response to Microsoft's Monopoly

There are different theories on why Open Source succeeds or fails (and opinions on whether it's succeeding or failing). The most common is not a theory at all, but the idea of "giving back to the community": that companies will give away assets because they're receiving assets for free from the community. It sounds nice, but, it's a really weak idea.

A less common theory, but one that seems more realistic because it's so cynical, is that some companies give away assets to form goodwill from the community, but mainly to impede competitors from gaining market share. The idea is that the marginal cost of distribution is near zero. The capital cost to produce the software is high. Thus, if you have sufficient investment capital, and you make something and give it away, you force your competitors to also spend an equal amount of money to duplicate your product. Competition is impeded, and you can dominate the niche and charge for add-ons or development that is based on the existing product.

The theory that doesn't get much play is the idea that companies will incur extra costs to avoid Microsoft. That is, when given the choice between Microsoft and another vendor, Microsoft usually has a price advantage, but because they also have their hands in so many businesses, including some that may compete with you. So, you will put up with a higher cost just to avoid Microsoft.

This idea explains copycat products like Firefox and OpenOffice. These products compete with Internet Explorer and Microsoft Office, directly. They don't produce revenue, and they cost a lot to create, yet, they are well funded projects. AOL funds Firefox, and Sun funds OpenOffice. Mac OS X is based on FreeBSD, and Safari is based on Konqueror.

In turn, companies that opt to support Firefox and OpenOffice incur additional costs for training. In return, they can avoid giving money to Microsoft, an potential competitor. By giving the products away, they earn goodwill, and also help prevent Microsoft from making money.

Nerds Central wrote a good blog post arguing that it's the monopoly that compelled large companies to invest in Open Source. Then, he goes the next step an says Open Source stifles innovation. It's worth reading. I don't agree with it, but it's an interesting idea.