Open Source Software Developers: Cheaper by the Dozen?

by on June 4, 2007 · 6 comments

Are FLOSS developers the future promise of a competitive ICT sector in the EU because they are…cheaper?

That’s the main point of Section 7.4 of the EC’s FLOSS report (Skills Development and Employment Generation), which argues that not only are FLOSSers faster and better than programmers using commercial software, they’re cheaper, too.

This analysis here is another in a series of blog posts on the EC FLOSS report. Previously, I’ve discussed how the report is a call to action for Europe’s policymakers, that FLOSS’s popularity is growing, and that many FLOSS developers live in the EU. The report’s authors claimed that FLOSSers work faster (ie. are more productive),  but as I discussed in FLOSS: The Software Hare that Beats the Proprietary Turtle?, the data didn’t really support that claim. In my last post I concluded that there was only a weak correlation that firms that contribute to FLOSS derive more revenue, on average, than non-contributing companies, and even if there were, the study was devoid of any cause/effect analysis.

By analyzing the EC FLOSS study, I’m not trying to beat up on FLOSS. Overall, the almost 300 page report is more interesting than it appears at first glance, and is actually a good case study on how / how not to devise a study to prove a public policy point. Instead, what really interested me was that the EC sponsored a study advocating for old fashioned industrial policy of preferences and antitrust actions aimed at promoting FLOSS over proprietary software.

Markets aren’t perfect, but government manipulations of supply and demand to achieve a particular result are notorious for very low payback. Moreover, the ICT industry has been a remarkable success in its own right and has driven productivity improvements in nearly every
sector, without the guiding hand of industrial policy like that being called for in the FLOSS study.

Getting back to the meat of this post, the study states that FLOSS developers should be less expensive because just about any teenager can become a FLOSS programmer through informal apprenticeships and learning on their own.

Here’s the logic: increase the supply of workers while holding demand constant, and wages will fall. This is simple economics, but what are the more intricate effects of FLOSS employment generation when it is married to a pro-FLOSS EU industrial policy? Would a FLOSS-driven ICT industry help the EU pursue its Lisbon strategy to increase jobs and growth?

Probably not, at least not without substantial government preferences to artificially stimulate demand for FLOSS programmers.

The study says that the supply of FLOSS developers can easily expand because they can gain skills “for free” by joining open source development communities. This on-the-job training can offer a level of expertise equivalent to or even greater than what a computer science degree from a university would provide, but at a fraction of the cost. Thus, the lack of training and education costs makes FLOSSers less expensive to ICT businesses and for industries and governments that use ICT.   

OTJ training has always been a great way to learn programming skills. But is working on FLOSS projects the only way to learn how to code? Buried in a footnote (#48), the report says that “perhaps” OTJ training works for proprietary software too. However, it is a different kind of experience, according to the authors. They say FLOSSers can start in their teens and can learn at home, whereas developers of proprietary software have to learn on the job or start their own firms.

Does FLOSS actually promise new and better ways to learn how to write software? Not really. Aspiring developers have always been able to learn programming skills pre-employment and on their own time. And there’s always been a network of online resources and training material for developers of proprietary software (think: Novell and Microsoft developer certifications). I mean, how else did Matthew Broderick’s character in WarGames break into the U.S. government’s WOPR computer system?

Active participation in FLOSS projects can undoubtedly be a good learning experience. But whether FLOSS provides superior on-the-job training is beside the point. The really interesting question is this: what is the logical end-game of FLOSSers being cheaper?

You don’t have to be a Nobel prize-winning economist to understand that an emphasis on building an ICT sector around inexpensive labor will drive wages down. In a global economy, a worker in a lesser developed country could live on just dollars a day. A race to the bottom is the kind of race the EU will wish it hadn’t entered, let alone run.

The FLOSS study authors say that developers will be so inexpensive that even small and medium-sized companies will hire them to work in-house, which they say will help local employment. However, in a globalized race to the bottom, it’s not a stretch to say that the EU would lose to even cheaper programmers in China, India and the former Soviet bloc. In the U.S., for example, the cost savings of IT offshoring in 2004 reached $7.0 billion, according to a study by ITAA — a 36.2% savings rate.

The authors of the FLOSS study realize this risk of driving down wages, and recommend government initiatives to pump-up demand:

An important consideration is that as governments and public institutions (e.g. health and education) adopt FLOSS, adoption by business and citizenry follows. The demand for FLOSS and ICT skills will be driven by government users….

Take note that when the FLOSS authors say demand for FLOSS “will be driven” by governments, they’re talking about their fervent wish for a new industrial policy based on FLOSS.

However, by increasing demand for FLOSS through preferences and mandates, the EU will find that in a “Flat World”, lower cost developers from other countries would rush to fill that demand. The result is more likely to be an increase in offshoring to China and India—not job creation in the EU.

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