Open Source and Open Standards -Effects on Software Industry in Emerging Economies

Stephen K. Kwan, Ph.D, Management Information Systems College of Business San José State University

6/27/2008
(Original Publish Date: 3/1/2006)

The relationship in a mature software marketplace among proprietary software vendors, enterprise IT buyers and open standards can be depicted as a triangle in tension. Each component exerts economic and political pressure on the other components in terms of pricing, lock-in, choice, openness, competitiveness, interoperability, etc. The triangle can be skewed if one component exerts unmatched force into the marketplace. The recent introduction of free and open source software into the marketplace has created a new situation. In certain cases, this type of software products, as less-costly and often openstandard compliant substitutes, are drawing customers away from proprietary software vendors. Examples will be used to illustrate how this new component provided new bargaining power to customers, made open standards more attractive, and created a new and significant tension in the software marketplace. The relationship described above probably does not hold true for emerging economies where countries are net importers of software and the domestic software industry is still nascent. This research project will propose strategies that can be undertaken by government, industry and universities in these emerging economies to foster the development of its domestic software industry towards a reduced dependence on imports. Examples and lessons learned from mature software markets on open source community software development, standard-setting practices, focused incubation, collaboration among government, universities and enterprises will be used as the foundation in formulating these strategies. The applicability of these strategies to China will be illustrated.