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When to be Open, When to be Closed

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Having reviewed business models that support open-source software development, we can now approach the general question of when it makes economic sense to be open-source and when to be closed-source. First, we must be clear what the payoffs are from each strategy. The closed-source approach allows you to collect rent from your secret bits; on the other hand, it forecloses the possibility of truly independent peer review. The open-source approach sets up conditions for independent peer review, but you don't get rent from your secret bits. The payoff from having secret bits is well understood; traditionally, software business models have been constructed around it. Until recently, the payoff from independent peer review was not well understood. The Linux operating system, however, drives home a lesson that we should probably have learned years ago from the history of the Internet's core software and other branches of engineering—that open-source peer review is the only scalable method fo

Having reviewed business models that support open-source software development, we can now approach the general question of when it makes economic sense to be open-source and when to be closed-source. First, we must be clear what the payoffs are from each strategy. The closed-source approach allows you to collect rent from your secret bits; on the other hand, it forecloses the possibility of truly independent peer review. The open-source approach sets up conditions for independent peer review, but you don't get rent from your secret bits. The payoff from having secret bits is well…

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