Economics of Free and Open Source in Thailand

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Economics of Free and Open Source in
Thailand?????????????????????????????????????????
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Contents

• Studys structure
• Chapter 1 Introduction
• Chapter 2 History Development and Literature
  review

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Studys structure
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Chapter 1 Introduction

• An important of the study
• Objectives
• Scope
• Source of information
• Methodology
• Benefits

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Source ??????????????????????????????????????????
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Rising of FOSS worldwide
Source NetCraft http//news.netcraft.com/archives
/web_server_survey.html
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Rising of FOSS worldwide
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Objectives of the study

• To apply economic theory in order to explain
• Why FOSS work and exists
• How can FIRM involve in FOSS
• To study and compare a development of FOSS
  between Thailand and Foreign
• To study a direction to develop FOSS industry in
  Thailand, both Govs policy and Firms strategy

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Scope

• A development of FOSS, with influences people
  both in government agency, firm and private,
  during 1999 present.

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Source of information

• Secondary data via publish materials ie. Journal,
  magazine, newspaper, etc.
• A survey and interview.

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Methodology

• Quantitative approach
• Qualitative approach
• Descriptive approach
• A comparison between fact from survey and theorem
  prediction.

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Benefits

• Government Get a basic idea and knowledge in
  conducting a policy.
• Firm Get a basic idea and knowledge in order to
  set its strategy.
• Researcher Get a basic literature, in order to
  improve a better knowledge.

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Chapter 2 History Development and Literature
review

• Meaning of FOSS
• History and development
• Definition
• Economics theory to explain FOSS
• Literature review

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Meaning of FOSS

• Free software with available source code.
• Community is significant.
• Success or failure of the software depend on
  community activeness.

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History Development

• Birth of Unix era
• BSD era
• Linus Torvalds and Linux
• Open Source era
• Community role
• Software in different form
• Communitys character

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Communitys character
Source Open Source Beyond the Fairy tales
??? Richard P. Gabriel ??? Ron Goldman
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Communitys character

• Available of source code
• Distribution of owner and control
• Scarcity of money, B/W and computer power but not
  man power
• Limited lock-in
• Software is not perfectTolerable
• Open KPI
• Professional attention
• Elegance code
• Ignorance of unskilled users

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Definition of FOSS

• Open Source Initiative Focus on collaboration
  and openness
• Free Software Foundation Focus on Freedom

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Economics Theory

• Near zero marginal cost
• Network externalities
• Critical mass
• Public goods Free-riding

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Near zero marginal cost
Source Microeconomics Paul Krugman ??? Robin
Wills ,2004
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Network externalities

• More users create more benefits. Consider Fax,
  Telephone and Mobile.
• On software
• Pool of experienced users and developer
• More application available

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Critical mass
Source Microeconomics Paul Krugman ??? Robin
Wills ,2004
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Public goods Free-riding
Source R.van Wendel de Joode et al. 2003
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Literature review

• Explain why hacker produce public goods. R. van
  Wendel de Joode et al. (2003)
• Empirical study. Gosh, Rishab Aiyer et al. (2002)
• Balance between community and firm. R. van Wendel
  de Joode et al. (2003)
• Limitation in developing country. Weerawarana,
  Sanjiva and Weeratunga, Jivaka (2004)
• Core Literature. Bessen, James (2004)

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Why hacker produce public goods

• Low contribution cost internet infrastructure.
• Intangible benefits
• Direct needs
• Fun
• Reputation

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Empirical study
Source Free/Libre and Open Source Software A
developer survey ??? Rishab Aiyer Gosh et al.
(2002)
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Balancing Firm force

• Patents
• Hire core developer
• Free-riding
• Commercialization

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Balancing Community force

• Law approach GPL, no prove in court yet.
• Non law approach
• Beachheads
• Boycott
• Competition development
• Power play
• Release early, release frequently

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Limitation on developing country

• Problem in IP enforcement
• Lack of low cost and efficient internet
  infrastructure
• Low education infrastructure
• Freedom to access information
• Lack of English language understanding
• Lack of high skill developer pool

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Core Literature Firm involvement

• Open Source Software Free Provision of Complex
  Public Goods. Bessen, James (2004).
• Based on model of innovations Agion Tiroles
  (1994)
• Which based on
• Foundation of incomplete contracts Hart Moore
  (1999)
• Complexity and renegotiation A foundation for
  incomplete contracts Segal (1999)
• A recent development as theory of incomplete
  contracts , pioneer by Oliver Hart
• Branch of contract theory and information
  economics

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Assumption about software

• Software is a complex goods.
• m features product, use or not use generate 2m
  different use-product.
• Testing, Debugging and maintenance account for
  82 of the cost of software.
• Complexity-related cost also limit the ability of
  packaged software to meet all consumer needs.
  Some turn to custom programming or self develop.
• Contract issue
• To write a contract to cover all features equal
  write the code itself.
• Incomplete contract certain transaction costs
  prevent some aspects of the future trade from
  being contracted ex ante (renegotiation in ex
  post).

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Self development vs. 1 on 1 contract
Sell code
Customer
Developer
invest
Customer
Self development
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Pre-package software
Choice 1 Customer get prepackage
Developer
Choice 2 Customer self develop
Sell package
Firm optimum price
Profit of software firm
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Proprietary extension API
Customer
Developer
Pre package
API
develop
Customer
Sell
Pre package
Customer
Pre package
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Free/Open Source
Customer
Get source m feature
Develop m1 feature and contribute back
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Conclusion

• FOSS is a Prepackages complement, not a direct
  competition.
• FOSS is suitable for skilled customer , which is
  niche market.
• Prepackage will focus to unskilled customer,
  which is mass market.
• Prepackage should decrease price API wont
  exist.
• FOSS increase social welfare.