Organizational Adoption of Open Source Software
Diomidis Spinellis,a Vaggelis Giannikasa, b
a Department Management Science and Technology, Athens University of Economics and Business, Patision 76, GR-104 34 Athens, Greece
b Institute for Manufacturing, University of Cambridge, 17 Charles Babbage Road, Cambridge CB3 0FS, United Kingdom
Abstract
Organizations and individuals
can use open source software (
OSS) for free,
they can study its internal workings,
and they can even fix it or modify it to make it suit their particular needs.
These attributes make
OSS an enticing technological choice
for a company.
Unfortunately, because most enterprises view technology as a proprietary differentiating element
of their operation,
little is known about the extent of
OSS adoption in industry and the
key drivers behind adoption decisions.
In this article we examine factors and behaviors associated with the adoption of
OSS
and provide empirical findings through data gathered from the
US
Fortune-1000 companies.
The data come from each company's web browsing and serving activities,
gathered by sifting through more than 278 million web server log records and analyzing
the results of thousands of network probes.
We show that the adoption of
OSS in large
US companies
is significant and
is increasing over time through a low-churn transition,
advancing from applications to platforms.
Its adoption is a pragmatic decision influenced by network effects.
It is likelier in larger organizations and those with many less
productive employees, and is associated with
IT and knowledge-intensive work and operating efficiencies.
Keywords: open source software; technology adoption; industrial practice
1 Introduction
Thousands of volunteers and numerous companies
develop, distribute, and license software
in a way that allows others to freely use it, study it, modify it, and redistribute it.
What are the prospects of the organizational adoption of this
so-called open source software (
OSS) and why should we care?
In this paper,
through a novel application of web server log scanning and host fingerprinting techniques,
we gather evidence of
OSS adoption among the
US Fortune-1000 companies,
and use it to examine factors associated with
OSS adoption.
Our observations are statistically significant and span a wide sample of companies.
However,
although each research question we test is backed by existing theories,
we freely admit that our study as a whole is data-driven rather than grounded on
a single cohesive theoretical framework.
Our main contributions are:
a) findings that theoretical frameworks of organizational
OSS adoption could build upon and should be able to explain, and
b) the description and demonstration of powerful internet-based methods
for collecting data about an organization's
IT operations.
A commonly accepted
OSS definition [
Coar, 2006] specifies that complying software
must be licensed for free redistribution (at no cost or for profit),
must provide access to its source code,
should allow the creation of derived works provided they respect the creation of the original author,
and should not restrict the use of the software with reference
to specific persons, groups, fields of endeavor, products, technologies, or other software.
Well-known examples of open source software include
the Linux operating system kernel,
the Mozilla Firefox web browser,
the OpenOffice.org office application suite,
the My
SQL relational database system,
and
the
PHP programming language.
Many
OSS products offer plausible alternatives to the
corresponding proprietary products, while some,
like the
the Apache web server,
the Sendmail mail server,
and
the
BIND domain name system server,
are market leaders in their categories [
Netcraft Ltd, 2009,
E-Soft Inc, 2007,
Simpson and Bekman, 2007,
Kerner, 2007].
With its roots in the academic world
OSS was initially viewed
with suspicion by some companies.
As a representative example,
Microsoft openly attacked it citing problems related to
version incompatibilities,
intellectual property risks (especially in the context of copyleft licenses),
lack of a credible business model, and
an inability to fund innovation [
Mundie, 2001,
The Economist, ].
However, other
IT companies have embraced it for operational
or strategic reasons.
One example of operational use involves
Google's thousands of servers, which work on a modified
version of Linux, thus benefiting the company through the system's low cost and the
ability to modify it to suit its needs [
Weber, 2005,p. 6].
As another example consider Apple,
which has used
OSS code from the Mach and Free
BSD operating systems
to leapfrog in the development of its widely-acclaimed
Mac
OS X operating system [
West, 2003].
On the strategic front,
IBM has built a large community of developers and
potential clients around the open source
Eclipse integrated software development environment [
Gamma and Beck, 2004],
while Sun-before becoming part of Oracle-created
a huge (though commercially underutilized)
mindshare among programmers and system administrators
with the open-sourcing of its Java platform and Solaris operating system
[
Goldman and Gabriel, 2005].
Proponents of open source software advance various arguments
regarding the benefits of its adoption [
West and Dedrick, 2001,
Wheeler, 2007,
Ven and Verelst, 2006]
- see Section
2.1.
There is also considerable anecdotal evidence on the use of
OSS
in non
IT companies (see references in Section
2.3).
However, theories and arguments on the adoption of
OSS
are seldom substantiated by empirical data, and the available
data are patchy, difficult to replicate and quantify, and unsuitable for
deriving generally useful theories and prescriptive results.
To address these problems we
analyze factors associated with the adoption of
OSS
(Section
3) and
validate them empirically through the analysis
of data collected for the
US Fortune-1000 companies
(Section
5).
The data come from each company's web browsing and serving activities,
gathered by sifting through more than 278 million web server
log records and analyzing
the results of thousands of network probes (Section
4).
There are several reasons motivating our study.
First,
patterns of
OSS adoption in the Fortune-1000 companies
reveal best practices, challenges, and opportunities
that may be applicable to other organizations.
Given the role of knowledge barriers in technology diffusion [
Attewell, 1992],
our findings outline the role of an ecosystem that can lower them.
In addition,
the software industry forms a vital and important part of the
US economy [
Rubin et al., 2002].
The emergence of
OSS is likely to form a disruptive change.
Therefore, companies developing proprietary software can study
OSS
adoption patterns to best determine how to adjust their business models.
Moreover,
the agile end-user and volunteer-driven practices used for developing open source software
differ markedly from the more rigid processes often followed in the development of proprietary software.
Thus, the commercial adoption of products developed under the
OSS
model can be a precursor to wider changes on how many other products are developed and marketed [
von Hippel, 1998,
von Hippel, 2001].
Finally,
for-profit and volunteer
OSS development organizations can study the way their products are adopted
in order to optimize their offerings and their dissemination strategies.
2 Related Work
Theories and empirical data related to this article fall roughly into
four fields:
organizational adoption of
IT innovation,
research on the adoption of
OSS by organizations,
studies of
OSS adoption at an aggregate level, and
reports on specific cases of
OSS use.
We examine work related to this paper's specific research questions
and in particular the organizational adoption of
IT innovation
in Section
3.
2.1 OSS Adoption by Organizations
For the choice of software that fits best an organization's
needs
Wang and Wang [2001] proposed criteria for a product-oriented evaluation
framework.
They used this framework to compare open source systems,
arguing that most of the criteria one must consider
when choosing an
OSS are common with those of proprietary
software selection.
Searching why and how enterprises adopt open source
Dedrick and West [2003], based on a series
of interviews with
MIS managers, developed a grounded theory of
open source platform adoption.
They classified the inherent factors they found into five categories:
the willingness to take risks on a new and unproven technology,
the need for organizational slack to evaluate the new technology and to
self-support unsponsored technologies,
the low cost of open source software,
the inherent trialability of "free" software distributed on the internet, and
the availability of external sources of support and expertise.
An important contribution of this study is the suggestion for
researchers to study the innovation adoption decision separately from
the issues associated with switching between standards.
This advice was coincidentally followed by
Glynn et al. [2005] who
investigated a case of large-scale
OSS adoption in
a specific organization.
Significant factors proved to be:
the possibility of collaborating in a reciprocal
fashion with the
OSS community,
the awareness of other organizations that were adopting
OSS,
cost,
the availability of
OSS-literate personnel, and
the ability to modify and access the source code.
Research around benefits and significant factors driving
OSS adoption, has led to the conclusion that the most important
reason of choosing open source is purchasing cost and the
total cost of ownership [
Forrester, 2008].
Although other benefits like stability and performance [
Berlecon Research, 2002],
flexibility and control [
The Dravis Group, 2003], external support [
Ven and Verelst, 2006]
and security [
Walli et al., 2005] are also
stressed in the advantages listed by open source adopters, it seems
that total cost of ownership and lower acquisition cost are the most
significant ones.
On the other hand, there are also many factors that operate as barriers
toward the organizational adoption of
OSS.
Among them the most important ones seem to be
knowledge barriers,
integration with legacy applications,
uncertainties introduced by forking,
sunk costs, and technological immaturity [
Nagy et al., 2010].
2.2 Aggregate Studies of OSS Adoption
Numerous studies examine
OSS adoption across
whole regions, industries, or application domains.
More detailed presentations of such work can be found
in a survey conducted by
UNU-MERIT [2006],
Wheeler's
2007 article on the reasons of choosing
OSS,
and recent work on the dynamics of the
OSS community [
Deshpande and Riehle, 2008].
In brief, studies agree that
web and database servers are the most common types of
OSS used.
According to
Unisphere Research [2006] 71% of Linux users chose it
to host their web servers and 65% for their databases.
Examining the adoption of web servers,
evidence suggests that open source is the most popular choice,
mainly because of the Apache web server with
its adoption showing a rising trend during the last 15 years
[
Netcraft Ltd, 2009,
E-Soft Inc., 2009].
Examining the use of open source operating systems,
studies have reported that
OSS adoption on
servers is markedly higher than on
PCs and workstations.
Specifically,
Netcraft Ltd [2001] found that 45% of operating systems used by computers
running public internet web sites was open source,
just 4.5 percentage points below Microsoft's share.
Gradually the adoption of
OSS is moving beyond the server market
extending along the entire software and application stack.
Forrester [2008], in a study of companies using
OSS
for experimental projects or prototyping on a group level,
found that 62% used
OSS desktop applications
and 71%
OSS programming languages.
Finally, on the sectoral distribution of
OSS adoption
two studies report
that firms in the telecommunications sector are the
ones most likely to adopt
OSS
[
Walli et al., 2005,
IDC, 2005], while
several surveys indicate the importance of a firm's size in
OSS adoption [
Walli et al., 2005,
Unisphere Research, 2006].
These last two findings are examined and discussed later in our paper.
2.3 Specific Cases of OSS Adoption
We searched existing publications looking for specific cases of
OSS adoption categorizing them according to
the applications used,
the organization in which they were used, and
the reasons cited for choosing
OSS.
1
We found relatively few studies and even fewer containing
enough details in all three areas.
It is therefore not prudent to derive reliable conclusions from
the sum of these studies.
From the studies we examined,
17 organizations used
OSS for providing back-office functionality,
two for sales support,
eight in their
R&
D activities,
and more than 30 for unspecified purposes.
Reasons cited for choosing
OSS include
lower cost [
Voth, 2003,
Proctor et al., 2003,
Searls, 2004,
Fitzgerald and Kenny, 2004,
Rossi et al., 2005,
Matthews et al., 2008],
lower hardware cost (
IDC, 2001a,
Geiszler et al., 2004;
Woods and Guliani, 2005,p. 85),
software features [
IDC, 2001b,
Yang and Jiang, 2007,
Matthews et al., 2008],
lower total cost of ownership [
Gupta et al., 2008],
quick deployment [
Searls, 2003],
portability across platforms [
Voth, 2003],
avoidance of formal procurement and commercial license management [
Voth, 2003], and
customizability [
Proctor et al., 2003].
3 Theory and Research Questions
Before posing our research questions
we must set straight our terminology:
the meaning of
OSS adoption and its relationship to
its actual use.
A thorny issue in the diffusion of innovation studies are
adoption's so-called
assimilation gaps,
which in the case of information systems are observed
as the difference between an information system's
acquisition and its productive deployment [
Fichman and Kemerer, 1999].
Gallivan [2001] made a similar observation by
distinguishing between
primary adoption where management decides that a particular information system
is required cover a perceived need, and
secondary adoption where the organization integrates the
information system at an operational level.
This happens through a process of assimilation,
which advances through the stages of
initiation, adoption, adaptation, acceptance, routinization, and infusion.
In the case of
OSS, acquisition is a lightweight process,
which may simply consist of downloading the software, perhaps after
clearing licensing issues with the organization's internal-control department.
Furthermore, the data we collected provide evidence of actual
use in the case of the web server and its underlying operating system,
while the policies of the organizations we study make it unlikely that
observations of
OSS use on the client side are isolated occurrences
(see Section
4).
Therefore, in our study we employ the term adoption to denote
small to full scale deployment and actual use.
There are many questions that an empirical study on the adoption of
OSS can help answer.
We start by looking at the industry-wide dynamics of
OSS adoption,
continue by focusing on individual companies, and
finish by examining some interesting people-related aspects.
The research questions of our study
neatly match the three of the four macro-factors identified by
Glynn et al. [2005];
see Figure
1.
Two questions, Q
1 and Q
2, are of a phenomenological nature,
examining the current status and outlook of
OSS adoption.
From the research framework we use as a basis,
we investigate some of the possible
technological factors through questions Q
3, Q
4,
organizational factors through Q
5, Q
6, Q
7, Q
8, Q
11, and
individual factors through Q
9, Q
10.
Although Q
4 helps us investigate inter-environmental
factors, unfortunately, we lack data to investigate factors of the
external environment.
One might be tempted to map the five critical factors
proposed for determining the use of agile or plan-driver development methods
to those applicable for choosing to use
OSS.
There are certainly some parallels between the factors and our questions:
size (Q
5),
criticality (Q
9),
dynamism (Q
8),
personnel (Q
10),
culture (Q
11).
However, given that there is no reason to think that the choice
of
OSS somehow relates to agility, we chose not to pursue this angle.
There are also other studies on
OSS and its adoption.
A number of them propose reasons for a company
to adopt software development techniques
used by
OSS projects [
Boehm and Turner, 2004] or
to participate in the development of an
OSS project [
Feller and Fitzgerald, 2001].
The reasons proposed are however not directly applicable to our research
questions.
Moreover, although the adoption of information systems
and software applications has been examined in depth
-
Jeyaraj et al. [2006] provide a comprehensive review of several proposed theories
-
we believe that the particular characteristics of
OSS
and the type of data we collected benefit from using
the more specialized framework presented in Figure
1.
Research Question 1 What is the level of OSS adoption in large US companies?
The quantitative
OSS adoption indicators we presented in Section
2.2 show that
OSS has long passed the market
introduction stage but has not yet reached the maturity stage.
In fact, an analytical study has proved that by following appropriate
strategic decisions open source and proprietary software can coexist
in a duopoly [
Casadesus-Masanell and Ghemawat, 2006].
We therefore believe that
OSS
is a mainstream product alternative currently in the growth phase.
Research Question 2 What are the dynamics of OSS adoption by individual companies?
An important question associated with the dynamics of
OSS
adoption is the behavior of individual organizations across time.
Are organizations dipping their feet in the water only to retreat from
OSS
after receiving a cold shower, or are they satisfied by its benefits and
increase the areas in which they adopt it?
Marketing practitioners use the term
churn rate to describe the
number of customers entering and leaving their pool.
Similar measures are customer turnover, defection, and attrition rates.
In our case
a high churn rate-organizations adopting
OSS in one year only to go back
to proprietary software in a next one-would indicate problems in the
technology's adoption, even in the face of an increasing overall adoption rate.
In contrast, an increasing scope of
OSS products used might indicate that
the organization is happy with
OSS and seeks to expand its perceived
benefits to other areas.
The two main factors that might impede a company's replacement of
proprietary systems with
OSS ones of equivalent functionality
are switching costs [
von Weizsacker, 1984,
Brynjolfsson, 1993,
Bessen, 2002] and customer loyalty [
Dick and Basu, 1994].
Once these considerable obstacles are overcome we would expect a stable
flow of transitions prompted by
the various benefits of
OSS outlined in sections
2.1
and
2.3 and also presented in other studies [
West and Dedrick, 2001,
Wheeler, 2007].
Research Question 3 In what order is OSS adopted within a company?
Do companies adopting
OSS
work bottom-up from the operating system (which many consider a commodity)
and progress to the more business-critical applications, or do they
avoid the disruption of an operating system switch and instead test the
waters in the application space?
The main determinants here are
the decomposition of software into applications and infrastructure
[
Messerschmitt and Szyperski, 2004,pp. 200-204],
the advantages enjoyed by platform leaders [
Cusumano, 2004,pp. 74-77],
and the importance of network effects [
Shapiro and Varian, 1999].
One argument is that pragmatic users want particular results
from their
IT infrastructure (for instance, obtaining or serving web pages).
These can often be provided by an
OSS application, and this scenario can
be easily tested by deploying such applications on the existing operating system.
Once an
OSS application is installed and proves its value, the underlying
operating system can also be switched to an open source one,
because the proprietary application that required a corresponding operating system has been removed.
This mode of adoption minimizes the drag of earlier technology on
IT adoption [
Fichman and Kemerer, 1993],
and at the same time builds on the
learning effects that may arise from the earlier use of a technology [
Stoneman, 1981].
Other factors affecting the order of adoption include
the risk associated with particular changes
(critical real-time customer-serving systems,
versus less-critical batch-oriented back-office operations),
as well as the levels of trust the company places on various
parts of an
OSS ecosystem.
Research Question 4 Is the selection of proprietary software or OSS subject to network effects?
In the preceding research question
3 we posit a particular
technology-based adoption scenario.
However, there may also be the case that that there are concrete network-specific
advantages in using applications of a particular type (open source or proprietary).
Several studies
have examined the important effect of network externalities in
a technology's adoption using both theoretical methods [
Katz and Shapiro, 1986,
Katz and Shapiro, 1994,
Economides and Katsamakas, 2006] and
empirical findings [
Saloner and Shepard, 1995,
Majumdar and Venkataraman, 1998,
Gowrisankaran and Stavins, 2004].
Intra-organizational network effects
(i.e. component selection interactions
within a company's boundaries)
associated with the adoption of
OSS can be direct or indirect.
The direct effects are associated with the prevalence of a particular product
within the organization where it enjoys advantages over a competing
product in the areas of
IT support, software provision [
Church and Gandal, 1992], and training.
For instance, if all a company's
PCs run Microsoft Windows,
its
IT administrators may find it easier to run the same system also on their servers.
The indirect or two-sided network effects [
Parker and Van Alstyne, 2005] are associated with
the co-existence of different but complementary products, such as the operating
system and the application running on it, or the web server and the corresponding browser.
In this case, products of the same kind benefit
through their superior interoperability,
through the availability of bundled licenses and support contracts, and
through the organization's contacts with (the typically segregated) support communities.
This has been empirically validated for the case of web servers and browsers
[
Gallaugher and Wang, 2002].
As a concrete example, if a company writes its software using Microsoft's .
NET
development tools this will run reliably only the company's Windows systems.
Based on the above description,
we consider
OSS and proprietary applications as two disjoined
networks with interoperability challenges.
Specifically, we examine whether a particular organization will try to use either
OSS applications or proprietary ones, rather than mix the two kinds
freely together.
Research Question 5 How is an organization's size affecting the adoption of OSS?
Let us now switch our view from the dynamics of
OSS adoption to the
organizations adopting
OSS.
The relationship between a company's size and
IT adoption can be viewed
either from an
IT management perspective [
DeLone, 1981] or
by looking at a company's organizational characteristics [
Hannan and McDowell, 1984,
Kelley and Helper, 1999].
For the majority of organizations we have studied,
the advantages of open source software are in most cases relatively small and
tactical rather than strategic.
However, they are compounded over the total number of installations
and the size of a company's
IT operations [
Cohen and Levinthal, 1989],
perhaps through economies of scale and scope.
As an example, a company with thousands of employees running only standardized
web-based applications could easily switch their
PCs to run
Linux and the Firefox web browser.
Although such a move in a large organization will entail large switching costs,
these are proportional to the organization's resources and therefore these
large costs should not derail the choice of switching to new software.
Furthermore, studies have found that
there is a positive relationship between organizational size, innovations,
and their implementation [
Damanpour, 1992],
that large firms are more likely to adopt innovations before smaller ones [
Davies, 1975,p. 118],
that the establishment and firm sizes are positively related to
ICT adoption [
Bayo-Moriones and Lera-López, 2007],
and
that a firm's size also affects the availability of
ICT-related skills
[
Morgan et al., 2006] and resources [
Spanos et al., 2002],
which are needed in a transition to
OSS.
Research Question 6 How is IT usage intensity affecting OSS adoption?
Another element of scale efficiencies is not associated with a company's size,
but with the intensity of
IT usage within it.
The theoretical underpinning is the same as that of the preceding
question
5,
but the driver is a higher density of
IT installations.
Compounding factors in this case are experience with
IT technology
[
Venkatesh et al., 2003,pp. 433-435, 447] and technical know-how [
Attewell, 1992].
Thus, companies in fields with a high
IT-usage intensity could be more likely
to adopt
OSS.
Research Question 7 Is OSS adoption associated with financial operating efficiencies?
Numerous studies have examined the influence on a company's performance
of technology policy and adoption in general [
Tornatzky and Klein, 1982,
Zahra and Covin, 1993,
Stoneman and Kwon, 1996]
and
IT in particular [
Brynjolfsson, 1993,
Brynjolfsson and Yang, 1996,
Stiroh, 2002,
Carr, 2003].
On a first reading the results appear to be inconclusive.
However,
Hitt and Brynjolfsson in their classic
1996 paper
used the theory of production and theories of competitive strategy
to deduce that there is no inherent contradiction between
increased productivity, increased consumer value, and unchanged business profitability.
In many cases the direct cost of purchasing
OSS and keeping it up to date is
zero or very low.
If this cost is reflected in an overall lower total cost of ownership it could lead
to increased profits.
However,
given that
IT costs are typically a relatively low percentage of a company's
total expenditures, it is more likely that
the causal relationship will be the other way round.
Namely, profitable well-run companies may be adopting
OSS as an additional appropriate
practice for lowering the cost and increasing the efficiency of their
operations.
This view is further strengthened by studies arguing
that firms for which an innovation is most profitable will
become early adopters [
von Hippel, 1988,
Attewell, 1992].
Research Question 8 How is an organization's stability affecting OSS adoption?
As posited by
Nolan [1973] and others who have built on his work [
King and Kraemer, 1984]
the introduction of information technologies in an organization proceeds in
distinct stages.
Therefore, it is likely that the introduction of a new technology,
like
OSS, will face obstacles that will depend on the company's
state of
IT growth.
Furthermore, the company's growth stage may also be a significant factor in the
adoption of innovation.
However, the theoretical arguments for this are conflicting.
Younger, growing firms may benefit through their flexibility [
Christensen and Rosenbloom, 1995]
as well as through lower
adjustment costs and modern capital stock, while older, stable companies
may profit from their technological experience [
Dunne, 1994].
This conflict is also reflected in empirical studies:
some report a positive relationship between an organization's age and its
ability to innovate [
Sorensen and Stuart, 2000] and others a negative one [
Kimberly and Evanisko, 1981].
The introduction of
OSS in an organization can be disruptive,
and the evolution and maintenance of existing
OSS installations
trickier than comparable setups based on proprietary software.
These problems can be less of an issue in a slower-growing, stable organization
where change and therefore demands from
IT staff are lower.
Companies that are in a flux, as evidenced by
increasing capital spending or sales,
or high levels of debt, are more likely to minimize the risk of their
IT
operations [
King et al., 1994,
Fichman, 2000] by opting for proprietary solutions.
In contrast, more stable companies that do not exhibit the previously
mentioned characteristics
may have established a culture for process improvements and
have more appetite for
IT risk and the ability to manage it effectively,
and will therefore be more likely to adopt
OSS.
Research Question 9 How is an organization's human capital occupation affecting OSS adoption?
A number of studies examine the characteristics of new technology adopters
[
Davis, 1989,
Thompson et al., 1991,
Venkatesh et al., 2003].
The main causation factors include
the judgment of one's ability to use technology -
as modeled in the social cognitive theory of self-efficacy [
Compeau and Higgins, 1995],
the perceived relative advantage within the context of the innovation diffusion
theory [
Moore and Benbasat, 1991], and the role of experience [
Venkatesh et al., 2003,pp. 433-435, 447].
More specifically,
Cohen and Levinthal [1989] found that human and knowledge capital are key
determinants for a firm's ability to assess technological opportunities and adopt
ICT, while
Brynjolfsson and Hitt [2002] state that
knowledge-intensive firms tend to be more eager
IT adopters.
The case for the adoption of
OSS can be further strengthened by hypothesizing that
knowledge-intensive industries are more likely to realize a significant-enough
return on investment on open source technologies that will warrant their adoption.
In other industries the costs of switching to open source and supporting
non-mainstream technologies may be difficult to justify, and, therefore, such
industries will be less likely to adopt
OSS.
Research Question 10 How is employee productivity affecting OSS adoption?
Open source software is often less polished than its proprietary alternatives;
version proliferation and poor usability are two often-reported problems
[
Nichols and Twidale, 2003,
Krishnamurthy, 2005,
Viorres et al., 2007].
Highly-paid employees, like knowledge workers,
may argue that the fit of the
OSS [
Thompson et al., 1991],
the service quality it offers [
DeLone and McLean, 2003], or
the perceived behavioral control they have over it [
Ajzen, 1991]
is worse than that of its proprietary alternative.
The key factors for resisting such change can be classified into
people-oriented, system-oriented, and interaction theories [
Jiang et al., 2000].
As the cost of the software used by highly productive workers
forms a small percentage of their total employment cost and the
software's quality reflects a lot on their productivity, spending on
industry-standard proprietary software may be a rational decision.
Consequently, we could expect that the relative advantage of
OSS viewed as
an innovation [
Moore and Benbasat, 1991,
Rogers, 2003] will be marginal.
As an example, traders with seven figure incomes are unlikely to skimp
on the operating system running on their
PCs.
Conversely, in Fortune 1000 companies with numerous
but less productive employees adoption of
cheaper though less polished
OSS can offer significant cost advantages,
and therefore management can easier mandate its use.
For instance, we can easily imagine the cost savings associated with
thousands of service desks running Linux and the Thunderbird mail client.
Research Question 11 Is the choice between OSS and proprietary software a matter of principle?
The choices between open source and proprietary software have been mainly analyzed
in the context of business strategies [
West, 2003] and the software industry [
Economides and Katsamakas, 2006].
Many open source adherents advocate the adoption of
OSS on the
basis of ideology [
Gay, 2002], while opponents have cautioned
against adoption by analyzing various risks [
Mundie, 2001].
We thus examine whether
OSS ideology and risks carry real weight,
or whether companies will choose between
OSS and proprietary software platforms
in a rational and pragmatic manner looking for their best interest [
Aupperle et al., 1985,
Clarkson, 1995],
irrespective of the software's license.
4 Methodology
We conducted our study by
examining web server logs and using network probes to
look for evidence of
OSS adoption among the
US Fortune 1000 companies.
Focusing on the Fortune 1000 companies benefited our study in a number of ways.
First, their large size means that such companies are likely to
adopt innovations before smaller ones
Davies, [1975,p. 118].
In addition, the Fortune 1000 companies cover most sectors of the
US economy,
while their activity forms a large part of it.
In fact, their revenues amount to about 41.5% of the total
US
corporate revenues for 2007 [
US Census Bureau, 2009] and about half (49.6%)
of the total profits [
Wolfram-Alpha, 2009].
Large firms are also more likely to be export-oriented or multinational
thereby increasing the study's applicability to a global audience.
Furthermore, their large size increases the visibility of their operations,
and makes them more likely to appear in our study's browser software radar.
Finally, our choice meant that for all the companies we could readily obtain
relatively reliable financial data,
a sectoral categorization, and
an address of an operating web site,
and thereby also a probable domain-name address their employees use when accessing the web.
Our study's
US and large company focus confines somewhat its wider applicability,
but the limitation is offset by the data's reliability and the sample's
homogeneity.
To a large extent our method avoids the
self-selection, recall, and pro-adopter biases [
Rogers, 2003] that
plague other studies [
Jeyaraj et al., 2006].
With a questionnaire-based study it would be probable that companies with
antiquated
IT strategies and systems would fail to respond;
the same could also be true for companies whose
IT management formed
a tactical or strategic advantage.
Both factors introduce a self-selection bias.
Furthermore, self-reports are unreliable thus adding a recall bias.
Finally, case studies often focus on adopters introducing a pro-adopter bias.
By collecting hard objective data from a predefined sample we avoid
these pitfalls, at the expense however, of loosing the ability
to select all the questions we might want to answer.
4.1 Data Collection and Processing
We used a variety of techniques to obtain data about the software used on
the companies' desktops and by their back-office operations.
Due to the methods we used, we focused on three types of software
in four distinct roles:
the web browser (on the desktop), the web server (in the back-office),
and the operating system on which the two are running
(on the desktop and in the back-office).
To determine the desktop operating system and web browser software
used by each company we examined web server logs.
We collected about 55
GB of log files from three sources:
our own servers (4.7
GB),
servers of our personal contacts (11.6
GB),
and files we located in the wild through Google queries (33.8
GB).
In total the log files contained 278 million entries.
Web servers record a log entry in a standardized format
for every file they send to a web browser.
For the purposes of our study the entry's important fields are the
IP address,
the date, and the client's software.
As a first step we processed each entry to convert the (typically) numerical
IP address, like 195.212.29.137 into a host name like
blueice18n5.uk.ibm.com.
We then went through all log entries looking for those where the last two
parts of a client's hostname matched those of a Fortune 1000 company's
web site address.
For instance, the above host name would match
IBM's web site address
www.ibm.com.
We identified 4.7 million records associated with Fortune 1000 companies.
These requests included 16,705 unique machine signatures
(an
IP address, a browser, and an operating system triple). Finally, for each matching entry we examined the client software details
to determine whether the web browser and the underlying operating system
were proprietary or open source.
As an example, the following client identification string
Mozilla/5.0 (Windows; U; Windows NT 5.1; en-US; rv:1.9)
Gecko/2008052906 Firefox/3.0
corresponds to an open source browser (Firefox) running on a proprietary
operating system (Microsoft Windows
XP).
We tabulated the results by company and year in a list specifying whether
a company was found to use a proprietary or open source (or both)
operating system or browser.
To determine the web server used by each company we retrieved the
company's top web page using the
wget tool, and logged the
HTTP protocol headers.
One of those headers contains an identification string of the web server,
which we used to establish whether the company used a proprietary or
an open source product.
To determine the operating system type we employed
nmap,
a network exploration and port scanning tool [
Wolfgang, 2002].
Nmap works by sending specific network packets to the host,
and analyzing minute accidental differences in the responses that can
be traced back to the responding computer's operating system.
It then matches those results against a database of 1503
(for the version 4.76 we used) so-called operating system fingerprints.
The match is probabilistic in nature and can often fail.
Table 1: Industry Distribution in Log Data and Among Fortune 1000 Companies (%)
Industries by SIC | For each year
| For each year
| Any entry
| Population |
| 2002-2008
| 2006-2008
| 2002-2009
| |
Agriculture, Forestry and Fishing | 0 | .0 | 0 | .0 | 0 | .0 | 0 | .2 |
Construction | 0 | .0 | 0 | .7 | 0 | .6 | 1 | .8 |
Finance, Insurance and Real Estate | 3 | .1 | 15 | .9 | 16 | .0 | 16 | .1 |
Manufacturing | 59 | .4 | 40 | .3 | 38 | .5 | 37 | .7 |
Mining | 3 | .1 | 2 | .2 | 2 | .9 | 3 | .6 |
Public Administration | 0 | .0 | 0 | .4 | 0 | .2 | 0 | .1 |
Retail Trade | 0 | .0 | 8 | .0 | 10 | .5 | 11 | .2 |
Services | 21 | .9 | 15 | .9 | 13 | .9 | 11 | .3 |
Transportations, Communications, | 12 | .5 | 12 | .3 | 12 | .6 | 13 | .0 |
Electric Gas and Sanitary Services | |
Wholesale Trade | 0 | .0 | 4 | .3 | 4 | .8 | 5 | .0 |
Obtaining historical data regarding the
OSS adoption proved difficult.
The method we used to obtain adoption evidence on the server side
(the web server and its hosting operating system)
provided us data only for the time we executed the probe.
On the other hand, web server logs provided useful data for the
client side (the web client and its hosting operating system)
for a time period spanning from 2002 to 2009.
We removed from the longitudinal study the data from 2009,
because it formed an incomplete and therefore potentially
biased sample.
(Events that occurred rarely within a year would be underrepresented
compared to the other, complete, years.)
For a number of reasons,
when looking for trends on
OSS adoption
we chose to look at the latest three years rather than the
full six year period for which we had logs.
First, the early logs came mainly from this paper's first author
web site, which focuses on
IT and
OSS.
This would introduce a bias due to the companies likely to access
such material.
Moreover, the available logs gave us required data only for 3.2% of the
Fortune 1000 companies for the whole 2002-2008 period.
Finally, data from the latest three years appear to give a considerably
more representative sample of our population than data from the full
six year period (see Table
1).
4.2 Threats to Validity
There are several threats to the validity of this study;
many are associated with the data we employed for identifying companies
using open source operating systems and browsers.
The first problem concerns the small number of software systems
we examine.
A company may use hundreds of software systems for a variety of purposes,
but we examine just four: the web browser, the web server, and their
corresponding operating system hosts.
We argue that these are ubiquitous and highly-visible systems,
from which we can derive generalizable lessons for desktop applications
and system software.
Nevertheless, lessons from these systems cannot apply to
specialized vertical applications,
and this remains a limitation of our study.
In addition, the time period we use for the research questions
with a longitudinal component
(Q
1, Q
2, Q
3)
is very small (three years).
This was a result of balancing data quality against time coverage,
as explained in Section
4.1.
For this reason we do not perform any longitudinal
regression analysis, and base our findings on statistically
significant results obtained for each year.
We determined the web browser and operating systems used in a company
by looking at the log entries created during web browsing.
However, the web server logs we collected form only a tiny fraction
of a company's complete browsing activity.
As detailed in Section
4.1,
for all the Fortune-1000 companies we identified 4.7 million web page records;
on average 4,668 requests per company.
These requests included 16,705 unique machine signatures
giving us an average of 16.7 uniquely-configured
PCs per company.
Therefore, our work shares the problems of any
empirical study based on a small sample of field data.
Other, less important, possible sources of error include
the parallel presence of
OSS and proprietary applications,
the provenance of the logs we examined,
web requests performed by a company's visitors,
the mapping of numerical
IP addresses into host names,
doctored
HTTP headers, and
limitations of the fingerprinting technique we employed.
A concern voiced by some of this work's reviewers is whether the
use of a particular operating system or browser reflects a company's
policy rather than choices of individual employees.
For this reason studies of
IT acceptance often
distinguish between voluntary vs. mandatory contexts [
Venkatesh et al., 2003]
and stress the importance of employing a multilevel perspective.
This criticism is justified, because we academics and researchers are blessed
with virtually unlimited freedom regarding the choice, setup, and configuration
of our computing infrastructure.
However, the situation in industry is different.
There, automated mass installations from a single stable configuration image,
a severely constrained user ability to install new software, and
rigidly enforced
IT policies are the rule.
In large listed companies
externally imposed legal requirements and standards,
2
the provision of a standard operating environment,
and the imposition of change management procedures
align the software used by a company's employees with its policies.
5 Analysis and Findings
|
|
Table 2: Statistical Results of t-test Analysis
OSS | Proxy | Mean | t-test
| p-value |
| | Users | Non-users |
| |
Any | Assets | 45,132 | 21,392 | 2 | .7458 | 0 | .0061** |
| Capital Spending 5 Year
| 12.85 | 18.18 | −2 | .8148 | 0 | .0050** |
| Growth Rate | |
| Gross Margin 5 Yr Avg
| 36.52 | 32.00 | 2 | .9380 | 0 | .0034** |
| Gross Margin TTM3
| 34.57 | 29.42 | 3 | .3307 | 0 | .0009*** |
| Profits | 851 | 569 | 1 | .6208 | 0 | .1054 |
| Positive Profits
| 1,210 | 730 | 2 | .9193 | 0 | .0036** |
| Revenue Over | 667,525 | 1,563,088 | −2 | .0478 | 0 | .0413* |
| Employee TTM
| |
| Revenues | 14,270 | 9,191 | 3 | .0363 | 0 | .0025** |
| Sales 5 Year Growth Rate
| 11.53 | 15.58 | −2 | .2555 | 0 | .0245* |
Web Browser | Revenues | 16,932 | 9,544 | 3 | .3780 | 0 | .0008*** |
| Capital Spending 5 Year
| 12.07 | 16.23 | −2 | .0088 | 0 | .0462* |
| Growth rate | |
| Profits | 993 | 491 | 2 | .2027 | 0 | .0281* |
| Positive Profits | 1,455 | 660 | 4 | .2950 | 2 | .18×10−5*** |
| Revenue Over | 674,797 | 992,923 | −1 | .9729 | 0 | .0509* |
| Employee TTM
| |
| Price to Tangible Book MRQ4
| 3.7790 | 2.2158 | 3 | .1306 | 0 | .0019** |
Client OS
| Revenues | 24,839
| 12,395 | 3 | .3830 | 0 | .0010*** |
| Gross Margin 5 Yr Avg
| 40.95 | 3,515 | 2 | .2226 | 0 | .0277* |
| Gross Margin TTM
| 39.22 | 3,298 | 2 | .3548 | 0 | .0198* |
| Profits
| 2,315 | 486 | 4 | .3463 | 2 | .79×10−5*** |
| Positive Profits
| 2,611 | 876 | 4 | .1299 | 0 | .0001*** |
| Revenue Over | 540,980 | 819,519 | −2 | .5600 | 0 | .0112* |
| Employee TTM
| |
Web Server | Assets | 45,856
| 19,258
| 2 | .5062 | 0 | .0127* |
| Revenues | 13,776 | 10,178 | 1 | .9698 | 0 | .0493* |
| Gross Margin 5 Yr Avg
| 36.46 | 33.08 | 2 | .0094 | 0 | .0451* |
| Revenue Over | 621,814 | 1,326,272 | −2 | .1751 | 0 | .0301* |
| Employee TTM
| |
| Sales TTM vs.
| 5.0407 | 8.9279 | −2 | .2109 | 0 | .0273* |
| TTM One Year Ago
| |
Server OS
| Capital Spending 5 Year
| 11.84 | 17.76 | −2 | .5478 | 0 | .0115* |
| Growth Rate | |
| Gross Margin 5 Yr Avg
| 40.02 | 33.52 | 2 | .3921 | 0 | .0180* |
| Sales TTM vs.
| 2.3631 | 10.9705 | −3 | .2821 | 0 | .0011** |
| TTM One Year Ago
| |
(*) α=0.05, (**) α=0.01, (***) α=0.001 |
|
| |
|
|
Table 3: Statistical Results of Logistic Regression Analysis
Dependent Variable | Independent Variable | Coefficient
| Wald Z
| p-value |
Open Source Software Adoption | Assets | 2 | .37×10−65
| 2 | .4732 | 0 | .0133* |
| Capital Spending 5 Year | −9 | .10×10−3 | −2 | .6837 | 0 | .0073** |
| Growth Rate | |
| Gross Margin 5 Yr Avg | 1 | .03×10−2 | 2 | .7788 | 0 | .0055** |
| Gross Margin TTM | 1 | .07×10−2 | 3 | .1186 | 0 | .0018** |
| Profits | 4 | .17×10−5 | 1 | .5728 | 0 | .1158 |
| Positive Profits | 1 | .38×10−4 | 2 | .8801 | 0 | .0040** |
| Revenue / Empl TTM | −1 | .51×10−7 | −2 | .4287 | 0 | .0152* |
| Revenues | 1 | .09×10−5 | 2 | .8715 | 0 | .0041** |
| Sales 5 Year Growth Rate | −9 | .97×10−3 | −2 | .1806 | 0 | .0292* |
OSS Web Browser Adoption | Revenues | 1 | .81×10−5 | 2 | .5934 | 0 | .0095** |
| Capital Spending 5 Year | −0 | .0140 | −2 | .1139 | 0 | .0345* |
| Growth Rate | |
| Positive Profits | 0 | .0003 | 2 | .7849 | 0 | .0054** |
| Revenue / Empl TTM | −2 | .32×10−7 | −2 | .3068 | 0 | .0211* |
| Price to Tangible Book MRQ
| 0 | .1115 | 2 | .3704 | 0 | .0178* |
OSS Web Client OS Adoption
| Revenues | 1 | .42×10−5 | 3 | .6523 | 0 | .0003*** |
| Profits | 0 | .0003 | 4 | .7087 | 3 | .88×10−6*** |
| Positive Profits | 0 | .0003 | 4 | .6175 | 2 | .49×10−6*** |
| Gross Margin 5 Yr Avg | 0 | .0112 | 2 | .1029 | 0 | .0355* |
| Gross Margin TTM | 0 | .0119 | 2 | .2721 | 0 | .0231* |
| Revenue / Empl TTM | −2 | .00×10−7 | −2 | .0097 | 0 | .0445* |
| Price to Tangible Book MRQ
| 0 | .0515 | 2 | .0567 | 0 | .0397* |
OSS Web Server Adoption | Assets | 2 | .25×10−6 | 2 | .6807 | 0 | .0073** |
| Gross Margin 5 Yr Avg | 0 | .0079 | 2 | .0100 | 0 | .0444* |
| Revenue / Empl TTM | −1 | .72×10−7 | −1 | .9599 | 0 | .0500* |
| Sales TTM vs. | −0 | .0070 | −1 | .9668 | 0 | .0492* |
| TTM One Year Ago | |
OSS Web Server OS Adoption
| Capital Spending 5 Year | −0 | .0164 | −2 | .3972 | 0 | .0165* |
| Growth Rate | |
| Gross Margin 5 Yr Avg | 0 | .0151 | 2 | .4482 | 0 | .0144* |
| Gross Margin TTM | 0 | .0114 | 2 | .0096 | 0 | .0445* |
| Sales TTM vs. | −0 | .0188 | −2 | .8322 | 0 | .0046** |
| TTM One Year Ago | |
|
| |
In order to search relationships and differences between financial data
and
OSS we started by looking at the difference between the means of
OSS
users and non
OSS users using the t-test method (Table
2).
We then used the logistic regression model [
Ross, 2004] based on the binomial
distribution to find the specific relation between our measures and
the type of software used (open source or proprietary)-see Table
3.
We chose this model in order to handle the "evidence of
OSS adoption"
binary dependent variable.
All the other analyses are commented in each research question and the
corresponding results can be found in this paper's tables.
|
|
Table 4: Evidence of Open Source Adoption Across Companies and Observations
| Company | Adoption ratio and 95% confidence intervals (%) |
Software | Observations | Low
| Estimate
| High |
Client OS6
| 477 | 17 | .7 | 20 | .3 | 22 | .9 |
Web Browser7
| 477 | 69 | .6 | 72 | .5 | 75 | .4 |
Server OS8
| 381 | 25 | .4 | 28 | .9 | 32 | .4 |
Web Server9
| 905 | 31 | .8 | 32 | .8 | 33 | .8 |
Evidence for Any | | |
of the Above | 964 | 55 | .3 | 55 | .9 | 56 | .5 |
Evidence for All | | |
of the Above | 150 | 73 | .3 | 79 | .3 | 85 | .3 |
| Request | |
| Observations | |
Client OS
| 4,668,399 | 0 | .98 | 0 | .99 | 1 | .00 |
Web Browser
| 4,668,399 | 24 | .58 | 24 | .62 | 24 | .65 |
|
| |
Research Question 1 Table
4 summarizes of
OSS adoption ratios for each one of the examined systems,
as well as the number of observations that led to the corresponding results.
We had at least one observation indicating the use of proprietary or
open source software for 964 out of the 1000 companies,
and observations for all four software systems for 150 out of the 1000 companies.
Interpreting the observation numbers for the web server
and its operating system is straightforward:
an observation means that the company is using an open source product.
The situation for the case of the web browser and its client operating system
is more complex.
In this case a single observation is one entry in the log files we collected.
Mapping the number of observations to actual users or adopters is not easy,
because
a) our sample is a small subset of a company's total web activity, and
b) the activity's origin is typically masked by the company's firewall
and cannot be tracked back to an individual
PC.
However, we can extrapolate the meaning of our client observations by
using known facts about Charter Communications,
a Fortune 1000 internet service provider with a large number of users that are,
by definition, active web users.
According to the company's
SEC filings,
during our log sampling period Charter
served 1.1 million customers at the end of 2002 and 3.1 million at the end
of 2009,
or about 2.1 million customers on average.
During the same period we found in the logs we collected
5.4 million entries from charter.com addresses,
giving us about 2.6 log entries per user.
Extrapolating this ratio to other companies we see,
for instance, that Boeing's 5.5 thousand open source browser log entries
indicate a corresponding number of 2.1 thousand users.
Figure 2:
Frequency distribution of
OSS browser log data.
As we can see in Table
4,
in the case of the web browser and its client operating system there is
a large difference (19-48%) between a single observation of client
OSS use for a particular company
(20.3% for the operating system and 72.5% for the browser) and
the figure across all the observations
(0.99% for the operating system and 24.62% for the browser).
The frequency distribution of
OSS client browser observations across
the companies we found using an
OSS browser is further elaborated in Figure
2.
It shows that from the 346 companies for which we found log entries corresponding to an
OSS browser,
at the one end 174 of them have entries corresponding to no more than 10% of all the company's log entries,
while at the other end 13 have entries corresponding to more than 90% of all their log entries.
This difference indicates that even companies that adopt
OSS for some applications
are loath to roll it out throughout their
IT infrastructure, which in many cases remains
wedded to proprietary systems.
One might argue that we should base our study on the percentage of particular observations
for each firm.
However, we believe that data are not sufficiently representative to allow one
to draw generalizable conclusions at this level of detail.
In Section
2.2 we showed that about
half of the running web servers and a quarter of the web browsers
are based on
OSS; these are the most popular
OSS applications.
Therefore, the adoption figures we report for the four software applications
are likely to be close to the upper bound for all possible software applications;
the few companies that are not using
OSS even in these popular niches are
probably wed to proprietary software for a number of valid reasons,
which are likely to also apply to other application areas.
Such reasons include
the availability of skills and sufficient funding to
support the in-house maintenance of
OSS applications,
the provision of resources to promote
ICT innovation,
the projected returned on investment
(explored in a number of our research questions),
network effects (see Q
4), specific functional requirements (see Q
10), as well as
the
IT department's or the company's policy toward the use of
OSS.
Regarding the level of
OSS adoption and its change over time,
we were able to obtain at least one sample each year over the three year
period 2006-2008 for 280 of the Fortune-1000 companies.
All companies in this sample used a proprietary operating system
for their web client and 97-99% of them used a proprietary web browser.
The percentage of the companies of our sample using an open source
browser for each of the three years rose from 52% to 70% to 76%,
while the percentage of those using an open source operating system
rose from 15% to 19% to 24%. Although the small number of years in our sample does not
allow us to perform regression analysis on it,
the data show
a significant percentage of companies using open source
software and a trend of increasing adoption rate,
particularly in the case of an open source browser.
Moreover, Figure
4 shows that the levels of
OSS
adoption vary considerably across various domains.
However, more than 50% of the Fortune-1000 companies in our sample
have used an
OSS system in five out of the eight
SIC
(Standard Industrial Classification) divisions we have examined.
Research Question 2 We examined the dynamic characteristics of
OSS adoption by
individual companies based on historical data.
Specifically, we tried to prove that occurrences of the
event
E1:
use and reject an open source system
occurred less frequently than events
E2:
use and accept an open source system,
using the following definitions.
E1: on year
N the company uses a number
x of open source systems
while on year
N + 1 the company uses
y OSS systems and
y <
x.
E2: on year
N the company uses a number
x of open source systems
while on year
N + 1 the company uses
y OSS systems and
y ≥
x.
Table 5: Statistics Regarding Historical Data
| | | | z-test |
Question | Sample | P(E2)(%)
| P(E1)(%)
| P(P(E2) > P(E1)) |
Q3 | 70 | 72 | 28 | 4 | .2488*** |
Q2 | 401 | 79 | 21 | 18 | .4127*** |
The statistical results listed in the second row of Table
5
show that 79% of the companies using an
OSS system in one year will keep it or add more in the next year,
and only 21% retreat, indicating an increasing coverage of applications
over time.
We used a z-test to examine the difference between these
proportions which, as it can be seen in the last column,
is statistically significant.
Table 6: Number of OSS Applications Being Used per Year
| Year | t-test |
| 2006(x) | 2007(y) | 2008(z)
| (x, y)
| (y, z) |
All Companies | 0 | .68 | 0 | .89 | 1 | .01 | 3 | .54*** | 1 | .96* |
Companies Already Using OSS | 1 | .28 | 1 | .26 | 1 | .31 | 0 | .41 | 1 | .13 |
We also studied the churn rate of companies adopting
OSS
by looking at the difference between the average number of
OSS systems in use
each year, using a t-test to check the significance of these differences,
again for the available data of the client side (see Table
6).
When looking simply at companies for which we have data for all years
in the range 2006-2008 we found a significant rise from one year to the next.
If however we restrict our view to companies using at least one
OSS application and look for a yearly increase in the number of
applications used we do not find a significant change.
Thus, we see that in total
there is an overall increase in the number
of OSS applications being used,
but when we look at existing OSS users there are no significant trends.
Research Question 3 We investigated whether the adoption of
OSS
progresses from applications to platforms,
in the context of a client's web browser and operating system,
based again on historical data.
Specifically, we looked at whether application-directed
transitions from a proprietary to an
OSS operating system (
OS)
(
E2; see below) are with statistical significance more frequent than
wholesale transitions to an
OSS client
OS (
E1) or
platform to application transitions (
E3).
For instance, it is more likely for a Microsoft Windows user
to install the Firefox web browser and then switch to
Linux than to switch to Linux and Firefox in one go.
In particular, we defined the following three events.
E1 (wholesale transition):
on year
N the company used an
OSS client
OS and web browser,
whereas on year
N − 1 it used a proprietary client
OS
and a proprietary web browser.
E2 (application-directed transition):
on year
N the company used an
OSS OS and web browser,
whereas on year
N − 1 it used an
OSS browser (which sparked the transition)
and a proprietary
OS.
E3 (platform-directed transition):
on year
N the company used an
OSS OS and web browser,
whereas on year
N−1 it used an
OSS OS (which sparked the transition)
and a proprietary browser.
(This is a highly unlikely scenario included for the sake of completeness.)
We located 70 samples on the client side that
represented one of the events meaning that on
year
N the company used a
OSS system while on year
N−1
it used its proprietray alternative.
A z-test for the significance
of the differences among the samples' events
(first row of Table
5)
shows that
the adoption of OSS progresses from applications to platforms.
We found no platform-directed transition
evidence (
E3) in our analysis.
The application of the dynamic behavior we found
will lead to a static picture where companies will use more
OSS
applications than platforms.
This can be seen in Table
4 where, particularly on the client side,
the adoption of
OSS applications is significantly higher than that
of
OSS.
Figure 3:
Network effects in the adoption of
OSS or proprietary software.
Research Question 4 We looked at the question of network effects in OSS adoption using
both diagrammatic and statistical methods.
An overview of the observed network effects in the adoption of
OSS or proprietary software can be seen in Figure
3.
On the diagram's left side a circle indicates companies that used
three identical software types:
all proprietary (filled circle,
•) or
all open source (empty circle,
°).
The specific types are marked by circles on the lines' columns.
For instance, the second line from the bottom corresponds to
the co-existence (marked by a circle on the left)
of an open source (the circle is empty)
web client operating system (the column corresponding to the first circle on the line),
web server application (second circle), and
a web client application (third cicle).
The thick horizontal lines show the probability of each occurrence,
i.e. the probability that a company will use a system
C of
a specific type (open source or proprietary),
if a company uses a system
A of one type and another system
B of another type.
The software type combinations shown are not mutually exclusive,
because our data may contain evidence that a company uses
both proprietary and open source software of a particular kind.
This is, for instance, the case in the bottom two rows,
which both show with a 100% probability that a company using an
open source web client operating system and web server application
will also use either a proprietary or an open source web client
application.
Through the high concentration of circle markings on the left at the
figure's bottom,
one can easily observe that various combinations of same types of
software (open source or proprietary)
are more probable to occur than combinations of dissimilar software types.
Table 7: Statistical Results of Analysis on Contingency Tables
Variables (OSS) | χ2
| p-value
| Cramer's ϕ |
Client OS — Server OS | 2 | .30 | 0 | .188 | 0 | .1198 |
Browser — Server OS | 2 | .46 | 0 | .162 | 0 | .1241 |
Browser — Web Server | 10 | .92 | 1 | .41×10−3** | 0 | .1605 |
Client OS — Web Server | 16 | .47 | 8 | .44×10−5*** | 0 | .1971 |
Client OS — Browser | 46 | .10 | 2 | .70×10−11*** | 0 | .3109 |
Server OS — Web Server | 72 | .55 | 5 | .06×10−17*** | 0 | .4458 |
Browser — More Than One | 99 | .12 | 2 | .37×10−23*** | 0 | .4606 |
Client OS — More Than One | 157 | .28 | 4 | .43×10−36*** | 0 | .5794 |
Server OS — More Than One | 158 | .21 | 2 | .78×10−36*** | 0 | .6561 |
Web Server — More Than One | 297 | .40 | 1 | .21×10−66*** | 0 | .6857 |
We also investigated this question using contingency tables.
Having these we performed the appropriate χ
2 distribution test for
independence and then used Cramer's ϕ measure to identify the strength of
association between
OSS applications and operating systems
either on the client or on the server side (Table
7).
As one would expect, there is no statistically significant relationship
between the adoption of an
OSS server
OS and the adoption
of an
OSS client
OS or a web browser.
In contrast there is a statistically significant (α<0.01)
relationship between all other adoption scenarios.
We do not list the contingency table relationship for proprietary
software, because
there were very few cases where
proprietary systems were never used, and, therefore,
the method could not be applied.
|
|
Table 8: Adoption Relationships Between Systems
| | | P(Uses (x)|Uses (y))
| z-test |
| y | x | n(%)
| n > 50% |
OSS
| Client OS | Browser | 100 | 51 | .0156***10 |
| Web Server | Browser | 81 | 11 | .5908*** |
| Server OS | Browser | 73 | 4 | .3858*** |
| Web Server | Server OS | 60 | 2 | .2972* |
| Server OS | Web Server | 58 | 1 | .8090 |
| Client OS | Web Server | 58 | 1 | .6368 |
| Client OS | Server OS | 51 | 0 | .1770 |
| Browser | Server OS | 44 | −1 | .2401 |
| Browser | Web Server | 43 | −2 | .6892 |
| Web Server | Client OS | 29 | −6 | .4683 |
| Browser | Client OS | 28 | −11 | .2424 |
| Server OS | Client OS | 26 | −4 | .3858 |
| Client OS | More Than One | 100 | 51 | .0156*** |
| Web Server | More Than One | 80 | 12 | .3322*** |
| Server OS | More Than One | 74 | 6 | .1270*** |
| Browser | More Than One | 57 | 3 | .3574*** |
Proprietary
| Browser | Client OS | 100 | 51 | .0156*** |
| Server OS | Client OS | 100 | 51 | .0156*** |
| Web Server | Client OS | 100 | 51 | .0156*** |
| Client OS | Browser | 98 | 51 | .0156*** |
| Web Server | Browser | 97 | 51 | .0156*** |
| Server OS | Browser | 96 | 24 | .1783*** |
| Server OS | Web Server | 86 | 19 | .6397*** |
| Web Server | Server OS | 84 | 17 | .9629*** |
| Client OS | Web Server | 64 | 7 | .8448*** |
| Browser | Web Server | 64 | 7 | .7645*** |
| Client OS | Server OS | 60 | 2 | .8158** |
| Browser | Server OS | 59 | 2 | .4865* |
| Browser | More Than One | 100 | 51 | .0156*** |
| Client OS | More Than One | 99 | 51 | .0156*** |
| Web Server | More Than One | 96 | 51 | .0156*** |
| Server OS | More Than One | 94 | 35 | .5233*** |
|
| |
Furthermore, we drilled down into the relationship between
systems by looking at the probability of finding one system,
such as a browser or a client
OS,
given that another was used, either open source or proprietary.
We verified the statistical significance of our results with
the z-test values listed in Table
8
using a threshold of 50% indicating that a particular adoption
scenario can be found in the majority of the companies in our sample.
Given this threshold,
we found statistically significant relationships
(marked with *** in the table)
for four cases of particular
OSS systems and for all cases
of adopting an additional
OSS system if one other is adopted.
We also found a statistically significant
relationship between any proprietary software type and any other.
This finding is not as interesting as it sounds;
it merely reflects the ubiquity of proprietary systems in all
the companies we have examined.
Table 9: Statistics of Adopting More Than One Application of the Same Type t
| Number of Known | | P(∃i, j: t(ai) = t(aj))
| z-test |
| Applications a1...ak | Sample | n(%)
| n > 50% |
| k | | | . |
OSS | At Least 2 | 446 | 51 | 0 | .8906 |
| At Least 3 | 353 | 55 | 2 | .4606* |
| All Four | 119 | 63 | 3 | .3528*** |
Proprietary | At Least 2 | 668 | 94 | 83 | .0644*** |
| At Least 3 | 578 | 99 | 182 | .1667*** |
| All Four | 354 | 100 | 369 | .3907*** |
Finally, we searched in our data set for companies for which we
have data regarding the use of at least two, three, or four
open source or proprietary systems.
In each of the three sets we looked at the probability of
finding more than one open source or proprietary system in place in
at least 50% of the companies.
The results appearing in Table
9 show that
when looking at three or four software types there is a
statistically significant probability of finding more than
one
OSS system in place
(e.g. an
OSS browser and an
OSS web server).
Furthermore,
when looking at two to four software types there is a
statistically significant probability of finding more than
one proprietary system in place.
The increase in probability as we look at cases where we know data
about more systems is due to the fact that as we include
cases with fewer application types in our sample,
this becomes less representative.
Consequently, we see that
proprietary software and OSS are associated with disjoined network effects.
Research Question 5 We looked at the effect of a company's size on OSS adoption using two types of
measures.
The t-tests indicated that
users of any OSS system have
significantly higher revenues and assets than users of
proprietary systems (see Table
2).
Furthermore, two logistic regression analyses showed a
positive relationship between assets or revenues and open source adoption
(see Table
3).
Focusing on specific
OSS systems a number of t-tests showed that
companies using an
OSS browser, or a client
OS, or a web server,
have significantly higher revenues than those using only proprietary
alternatives.
Similarly, companies using an
OSS web server have significantly higher assets
than those using a proprietary web server.
Finishing with a logistic regression analysis of specific
OSS systems
we found a positive relationship between revenues and the adoption of an
OSS
web browser or a web client
OS and between assets and the adoption of
an
OSS web server
OS.
Research Question 6 A correlation analysis between an industry sector's
IT capital stock share [
Stiroh, 2001] and its corresponding
OSS
adoption ratio gives a Kendall's τ coefficient of 0.33,
which indicates an agreement, though not perfect, between the two rankings.
11
We thus find that
the adoption of OSS benefits from a high intensity
of IT usage as measured through the IT capital stock share.
Figure 4:
Evidence of
OSS adoption across industries.
Furthermore, Figure
4 illustrates the level of
OSS
adoption ratio evidenced by our data across the ten top level
SIC
divisions.
The divisions are ordered by increasing rates of
OSS adoption,
and one can thus readily observe that
OSS adoption is rising
with surprising regularity from the diagram's left to the right
as a company's focus moves toward the consumer presumably
commanding a higher intensity of
IT usage.
Research Question 7 We observed statistically significant
differences on gross margins and (positive) profits between users and non-users of OSS.
Furthermore, we also found
significant positive coefficients of the logistic
regression (Table
3).
We failed to demonstrate a relationship between
profits in general (including losses expressed as a negative value)
and the adoption of
OSS.
This is not too surprising, because a company (other than an airline) with losses
is in a short-term exceptional state and all bets regarding its strategy
and tactics are off.
Looking at specific
OSS systems t-tests analyses show that
companies using open source client operating systems have higher gross margins
(
TTM and five year average) and (positive) profits than those
using proprietary alternatives.
Companies using
OSS browsers appear to have higher profits,
while companies running
an
OSS web server or server
OS have significantly higher
five year average gross margins than companies running proprietary alternatives.
Furthermore, for each of the preceding measures logistic regression
finds a positive relationship with the adoption of
an
OSS client
OS,
a web server,
and server
OS.
Web browser adoption is related only with positive profits,
while the adoption of a server
OS is also related in a positive way with
both the five year average and the
TTM gross margin values.
Research Question 8 We tested the organizational stability effect on OSS adoption by
performing a t-test for means and a logistic regression analysis
(see tables
2 and
3).
We used three financial measures as proxies of a company's
dynamism:
capital spending five year growth rate,
sales five year growth rate, and
sales
TTM vs.
TTM one year ago.
These indicators measure change, therefore,
companies with low values will be
unexciting and stable whereas
growing and volatile companies will have
high associated indicator values.
The t-tests indicated that
companies using any OSS system have
significantly lower dynamic financial indicators than those
using proprietary systems (see Table
2) apart from
sales
TTM vs.
TTM one year ago for which this difference
existed only for the server side.
Also, three logistic regression analyses showed
a statistically significant
negative relationship
between the financial indicators associated with lively,
volatile, and growing
companies and OSS adoption (see Table
3).
Again the same relationship held only for the software on
the server side regarding sales
TTM vs.
TTM one year ago.
Focusing on specific
OSS systems a number of t-tests showed that
companies using an
OSS web browser or server
OS present
a lower growth rate of capital spending in the last five years.
Similarly, companies that use an
OSS web browser or server
OS
present lower levels of sales
TTM vs.
TTM one year ago.
The logistic regression showed a negative relationship between
the five year average capital spending growth rate
and the adoption of an
OSS web browser or
server
OS, and between sales
TTM vs.
TTM one year ago
and the adoption of a
OSS web server or server
OS.
Research Question 9 Again, Figure
4 indicates that
in relative terms
OSS adoption is lower
in sectors where manual workers are prevalent and higher in sectors where
knowledge workers dominate.
Similarly, a correlation analysis
between an industry sector's
knowledge workers share [
Wolff, 2006] and its corresponding
OSS
adoption ratio gives a Kendall's τ coefficient of 0.52,
which indicates an even better agreement than that obtained for
question
6.
Moreover, on the client side, t-test and logistic regression show that
organizations with knowledge-intensive workers are apt to adopt OSS.
The t-tests indicated that companies using
OSS browsers have
significantly higher price to tangible book
MRQ while
logistic regression showed that there is a positive relationship
between this measure and the adoption of both
OSS software
types on the client side (see tables
2
and
3).
Research Question 10 We examined the relationship between employees' productivity
and
OSS adoption by looking at
the revenue that each employee brings into the company.
The statistical analysis listed in
tables
2 and
3
indicates that
OSS is more likely to be adopted by large organizations with less productive employees.
A number of t-tests showed that adopters of an open source
browser, client
OS and web server produce less revenue
for their firm (on a
TTM base) while logistic regression
proved that the adoption of
these software types is also negatively correlated with
the revenues over employee
TTM figure.
Research Question 11
Table 10: Statistics on Adoption of Both OSS and Proprietary Software
Number of Known | | P(use both software types)
| z-test |
applications | Sample | n(%)
| n > 50% |
At Least 2 | 692 | 60 | 10 | .6668*** |
At Least 3 | 434 | 81 | 22 | .2601*** |
All | 150 | 79 | 9 | .6187*** |
We tested the pragmatism of
OSS adoption choices
by looking for zealots:
companies that use exclusively open source or proprietary software.
We chose sets of companies for which we had data regarding their
software choices in the same way as that used in question
4.
Table
10 confirms that in the three data sets
61-81% of the companies will mix and match both software types.
The raw results are also interesting.
In the set of 150 companies for which we have data on all four software systems
only 31 companies used just proprietary software,
just 11 used
OSS for all four software types, and
no companies used exclusively
OSS.
We thus see that
organizations will mix and match OSS and proprietary products as needed.
6 Discussion and Conclusions
Table 11: Company Examples Across Research Questions
| Level | Evidence of OSS Adoption | Example |
IT usage | High | Yes | PSS World Medical |
intensity | Low | No | Newmont Mining Corporation |
Knowledge | High | Yes | Travelers |
intensity | Low | No | Target |
Revenue per | High | No | Dow Chemical |
employee | Low | Yes | MGM Mirage |
Consumer | High | Yes | Starwood Hotels |
focus | Low | No | Kiewit |
Our results
show that the adoption of
OSS in large
US companies is significant and
is increasing over time (Q
1) through a low-churn transition (Q
2),
advancing from applications to platforms (Q
3).
The adoption of
OSS is a pragmatic decision (Q
11)
influenced by network effects (Q
4).
The adoption is likelier in larger organizations (Q
5)
and is associated with
IT and knowledge-intensive work
(Q
6, Q
9),
operating efficiencies (Q
7),
and less productive employees (Q
10).
Table
11 lists scenarios of
OSS adoption
as indicated by our findings
illustrated by examples of conceivable corresponding companies.
(Although the examples are consistent with our data, we do not claim
statistically validated significance for the specific cases.)
The results associated with question
10 may seem to contradict
the answers to questions
6 and
9.
One would expect knowledge-intensive workers to be
associated with high-revenues per employee and
IT usage intensity.
However, at least in the context of
OSS adoption, we have
seen that these are orthogonal measures.
There seem to be knowledge-intensive operations with relatively
low revenues per employee, such as a call center,
which can benefit from
OSS adoption.
There are also cases, such as in the health industry,
where high revenues per employee are not (yet) associated with
a relative high intensity of
IT usage.
Our findings are broadly in agreement with existing theory on
the coexistence of open source and proprietary software in a duopoly
(Figure
3 —
Casadesus-Masanell and Ghemawat, 2006),
switching costs
(Q
2 —
von Weizsacker, 1984),
the advantages enjoyed by platform leaders
(Q
3 —
Cusumano, 2004,pp. 74-77),
the drag of earlier technology on
IT adoption
(Q
3 —
Fichman and Kemerer, 1993),
network effects
(Q
4 —
Katz and Shapiro, 1986),
the positive relationship between organizational size and the adoption of innovation
(Q
5 —
Kimberly and Evanisko, 1981),
the effect of technical know-how
(Q
6 —
Attewell, 1992),
the role of a company's technological experience
(Q
8 —
Dunne, 1994),
the risk in
IT operations
(Q
8 —
King et al., 1994),
the importance of human and knowledge capital
(Q
9 —
Cohen and Levinthal, 1989), and
the rationality of corporate social responsibility
(Q
11 —
Clarkson, 1995).
Two of our findings add weight to
intensly studied organizational
IT adoption predictors reported by
Jeyaraj et al., [2006].
Specifically, organizational size (Q
5)
has been found to be significant in 8 out of 12 studies,
and the
IS department size (indirectly examined by Q
6)
has been found to be significant in 4 out of 7 studies.
On the other hand, we felt that our research was
treading on thin theoretical ground in the areas of
intra-organizational network effects (Q
4),
the relationship of
IT operations and profitability (Q
7), and
the effect of an individual's productivity on
IT adoption decisions (Q
10).
These are clearly areas that can benefit from further research.
Finally, as one would expect,
our study failed to find support that companies follow the ideological
arguments associated with the adoption of
OSS
(Q
11 —
Gay, 2002).
It would be a mistake for organizations to read our results in a prescriptive
manner.
The way
OSS is currently being adopted does not mean that this is the way
OSS should be adopted.
A number of companies have successfully used
OSS as means of strategic
differentiation [
Samuelson, 2006,
West, 2003].
It is quite likely that the majority of successful
OSS adoption cases
concerns inward-looking
IT systems, which our study failed to capture.
Even at the tactical level, innovation and progress in the
IT
industry can well change the way
OSS is deployed and used.
Following the flock reduces only known risks and will limit opportunities.
Despite the applicability limits of our results, which we outlined
in the preceding paragraph,
there are some clear lessons that a
CTO can learn from this study.
OSS is a legitimate technological choice, which is increasingly followed
by major
US companies.
In stable slow-growth environments with a large number of software installations
the low purchasing and maintenance cost of
OSS
can result in savings and thereby increased profitability.
Examples include
call centers,
workstations running just web-based applications,
special-purpose platforms, like cash registers and mobile terminals,
large server farms, and
wide scale deployments of bespoke software with
few dependencies on proprietary ecosystems.
O
SS is not an all or nothing proposition;
it can be adopted in a gradual fashion testing the waters for
benefits and unknown risks.
Our study's findings are likely to be painful for the
OSS community.
For many of its members, there are powerful engineering, organizational,
and ideological factors acting in favor of
OSS [
Gay, 2002,
Kuan, 2003].
Nevertheless, our study found evidence that the open source software's
main advantage is its low cost.
Where this doesn't dominate a company's financials and purchasing
decisions,
in rapidly-changing demanding areas and environments,
proprietary offerings seem to have an edge.
Yet, there is no reason for the community to read too much from these
findings.
For most of its life
OSS has thrived in the hands of enthusiasts
and hobbyists, away from the limelight of big business.
The only who should legitimately worry are those viewing
OSS as a foundation
for a highly profitable business model.
We find it unlikely for somebody to achieve financial success on
software that is freely available and that big companies treat as a
low priced commodity.
In any case, the
OSS community has always had an uneasy relationship
with the software's commercial exploitation, and in that light our
results can be seen as positive.
Furthermore, one finding of our study (Q
3) can help the formulation
of the Linux community's strategy.
This shows that
proponents of Linux who try to push
OSS from a platform
to the desktop may be fighting the wrong war.
Organizations are more likely to adopt an
OSS operating system
if they have already migrated to
OSS applications.
Perhaps, the clearest lessons from our study concern the software industry.
We showed that in the area of web clients and servers
OSS has
a large following, and that big companies are increasingly adopting it
as they realize its cost benefits in those areas.
Software companies that derive a large part of their income from selling
standardized products that can be easily replaced by
OSS offerings risk
seeing their corresponding income stream collapse.
Possible remedies include balancing the business between the offering of
products and services [
Messerschmitt and Szyperski, 2004] and moving toward higher-value,
more sophisticated, and tighter integrated products,
which we have shown to be less likely to be replaced by
OSS.
We were startled by this paper's results.
This paper's first author is not a neutral observer, but an
OSS advocate.
He has written monographs on
OSS
(references removed for double-blind review)
he has developed a number of
OSS tools,
he is contributing to a major
OSS project, and
has served as a board member of a national academic
NGO that promotes
OSS.
The paper's findings came to him as an unwelcome surprise:
the main reason for adopting
OSS is lower cost and higher operating
efficiencies;
OSS appears to be unwelcomed by highly-productive employees and in
rapidly growing and volatile organizations.
Arguments frequently put forward in favor of
OSS
regarding its flexibility and the retention of technological know-how
[
Wheeler, 2007]
were shattered through findings showing exactly the opposite.
Organizations that need flexibility choose proprietary software,
as do highly-paid employees who could supposedly most benefit by
tinkering with
OSS to make it fit their needs.
Yet in retrospect the results are not too surprising, if one removes the
rose-tainted glasses of romantic idealism and technological optimism.
Companies will profit by focusing on their core competencies and
by optimizing their operations [
Prahalad and Hamel, 1990].
There are few reasons to believe that the market would fail to provide them
with the software products most suitable for their needs in terms of
flexibility, technological sophistication, or ability to adapt software
to their specific needs [
Attewell, 1992].
The market's success will therefore leave cost
as the major remaining benefit of
OSS.
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Revision: 1.246
Footnotes:
1In our search
we ignored grey-literature sources, such as web sites, pamphlets,
and trade press articles.
2Larsen et al. [2006]
list 17
IT governance tools,
among them the well-known Sarbanes-Oxley Act of 2002 (
SOX) and
Information Technology Infrastructure Library (
ITIL).
3Trailing twelve months.
4Most recent quarter.
5The very small coefficient values
are due to the very big difference between the values of the variables (0/1 for the dependent variable and many orders of magnitude higher values for the
independent one). This also occurs in the other regression tests.
6Web log entry browser client identification. Example: Firefox/3.0.
7Web log entry client
OS identification. Example: Linux i686 (x86_64).
8nmap operating system fingerprint. Example: Linux 2.6.X.
9 HTTP protocol headers obtained with
wget. Example: Apache/1.3.33.
10We use this value as the biggest possible for
z
11In
order to match with the source's
classification we split the manufacturing industry into Durable
(
SIC codes 20-23, 26-31)
and Non-Durable (
SIC codes 24, 25, 32-39)