Briefing paper

Purpose

1. This paper provides background information about open source software, and proposes next steps with respect to the use of open source software by government.

Executive summary

2. Open source software is an alternative to commercial software, which has always been popular in some areas of use and is gaining visibility in other areas, particularly desktop operating systems and office applications (e.g. word processing, spreadsheets, etc).

3. There is increasing debate over the use of open source software. Proponents point to its low cost of ownership and its generally better level of security and interoperability; providers of commercial software reject these claims and say that they provide better functionality and support than can be obtained for open source software.

4. The waters can be muddied by debates on intellectual property, but this is a separate issue. All software, including open source, comes with a licence which states what you can do with it - how many machines it can be run on, whether you can distribute it further etc. The defining characteristic of open source software is the ready availability of the source code and hence the ability of others to scrutinise and modify software to suit themselves.

5. In practice open source software is generally free or cheap to acquire, and the licensing regime is not onerous either to administer or to fund. Commercial software, by contrast, does not distribute its source code, and generally requires ongoing payments in respect of licensed software, which must be administered and calculated according to the terms of the licences.

6. There is no reason inherent in open source licensing why government agencies should not consider open source software on the same basis as commercial software.

7. Agencies should make decisions on the use of software on cost, function, interoperability, and security grounds. Much information is available, on public websites and from private IT analysis services such as Gartner, to help agencies evaluate their software options. Agencies should assess alternatives whenever they are considering upgrades, or relicensing existing software.

Comment

What is open source software?

8. Software is not generally owned by its users, but is licensed. The licence defines the terms and conditions for use of the software. In all cases the user accepts the terms and conditions of the licence before use, whether explicitly through clicking "I accept" or implicitly by breaking the seal on a box.

9. There are two dominant types of software licence:

• commercial software (also referred to as closed source or proprietary software) - software which is generally licensed for a fee, whose source code is kept secret, and which is most often developed by a company; and
• open source software - software whose source code is openly published, which is available at no charge, can freely be modified and distributed, and which is most often developed by voluntary effort [ For further information on criteria that software must meet to be deemed open source software see: http://www.opensource.org/docs/definition_plain.php].

10. Commercial 'mass-market' software is a relatively modern phenomenon. Until about 1980 almost all software was created by hobbyists and distributed freely. With the commercialisation of software came the notion that the source code needed to be kept secret in order that the software could not easily be modified and passed off as another's work.

11. Source code is the programme as written by the programmer. Another programmer can understand it and change it. Once finished, source code is converted by a computer into executable code, which is distributed. Executable code is not in general readable by humans and cannot be changed without access to the source code.

12. Open source software is mostly written by groups of individuals cooperating through the Internet. Open source authors working on the same project have often never met each other. They are not paid for their efforts, although some are permitted to spend work time on their open source endeavours by their employers. Rather than working for money, most open source authors seek rewards of reputation among their peers. They vie with each other to produce the best software.

The business model

13. Clearly the business models for commercial software, and open source software are very different. The following section explores the contrasting models.

14. The commercial software industry relies primarily on software licensing fees of new applications and upgrades to generate revenue. They have overheads such as staff and premises, the sales channel with resellers, and satellite offices. Costs and margins become part of the price the customer pays for licences and upgrades. Resellers add their own margin to cover the sales process and support.

15. Upgrades provide more functionality and fix problems, and also help to maintain revenue streams. Entry and exit risks are significant for commercial software vendors, and drive their concern about proper licence conditions (i.e. ensuring software is not pirated). In addition, companies aim to create a 'critical mass' of the market to create a barrier to entry of new competitors.

16. Groups of individuals and/or companies that develop open source software cannot cost-recover through software licences. Revenue streams can be created by companies (and individuals) through:

• packaging and distributing open source software, so that users do not need to download over the Internet (often more convenient to an end user);
• customising versions of open source software for clients (e.g. IBM has reportedly spent over US$1 billion improving and extending the open source Linux operating system - all this development is itself open source and available to others to use or to build on further);
• providing software support services to users (i.e. in much the same way commercial software is supported through licensing fees); and
• bundling open source software with hardware, and/or other software.

17. Software upgrades of open source software are often a mix of a company and users sharing their changes to the source code. Such companies will often provide employment for open source authors while leaving them free to develop more open source software.

Current use of open source software

18. Open source software has always been popular among computer engineers, and has been integral to many computing innovations. For instance, the rapid development of the Internet has been entirely dependent on freely available standards, and open source software. Its growth was made possible by the availability of free and quickly developed software, making it easy to introduce and extend features such as the World Wide Web (e.g. web browsers and web servers).

19. Open source software, alongside commercial software, is used widely for Internet infrastructure including mail servers, web servers, and domain name servers.

20. Today, open source software alternatives to commercial software exist in most, if not all, types of software application. Widely-used open source software includes:

• Linux (an operating system);
• Open Office (an office suite containing a word processor, spreadsheet, etc);
• Mozilla (a web browser);
• Apache (the dominant web server program); and
• Evolution (an email and calendar program).

21. In terms of desktop computers and servers in commercial and government organisations, commercial software is currently dominant. However, there is an increasing focus on open source software options in these areas. In particular, the Linux operating system is gaining significant popularity in the server market.

22. Organisations are increasingly deploying or considering open source software in all aspects of their information technology infrastructure. Although open source software does not currently have a strong foothold in desktop operating systems and common office productivity applications (such as word processing and spreadsheets), there is growing interest, partly as a way to reduce software costs.

Predicted future use of open source software

23. In July 2001, the United Kingdom's e-government agency commissioned a report on open source software that predicts that the use of open source software is set to increase in the coming years [ Peeling, N., and Satchell, J. (July 2001) Analysis of the Impact of Open Source Software, available from: http://www.govtalk.gov.uk/documents/QinetiQ_OSS_rep.doc. ]:

• within five years, 50% of the volume of software infrastructure [ Defined as "software that represents the plumbing and IT systems and the Internet . . . includes operating systems, databases, Web servers, and all the other major components that enable software applications to run".] could be taken by open source software;
• within 2-3 years, open source software's position in large servers (e.g. those managing large multi-user databases) will grow from its current position of near zero penetration, to a position where open source software is a viable option;
• within the next year, open source software is expected to become the market leader in consumer computing devices (e.g. set-top boxes, digital video recorders etc).

24. Research from the Gartner Group [ Driver, M. (2001) The Future of Open-Source Software, Gartner SPA-13-7536, 14 June 2001.] supports these predictions:

"The open-source model will increasingly be accepted by software vendors and consumers, but will not replace proprietary licenses as the primary commercial software licensing model through 2006 (0.9 probability). However, open source will have a lasting impact on commercial software products and initiatives. Increasingly, mainstream Information Systems organisations will find open-source products and technologies useful - and, in some areas, even crucial - for the success of their IT strategies . . . In the future, licenses and products that leverage the best features of the open-source model (e.g., quality and flexibility) and the traditional proprietary models (e.g., support and intellectual property rights) will prove the most commercially viable."

25. Other indicators pointing toward the ongoing growth and importance of open source software use, include:

• most of the major enterprise software vendors now sell versions of their software that are able to operate on Linux;
• a number of high profile companies, such as Amazon, Deutsche Telekom and Air New Zealand, have switched to the Linux operating system and report substantial savings. Telstra is rumoured to be considering switching 45,000 desktop users from Windows to Linux;
• some major IT companies are committed to using open source software as a core part of their business, and are investing significantly in enhancing their capabilities with respect to open source software (e.g. support services); and
• some commercial software vendors whose business model is challenged by open source have been lobbying the United States and other governments in an attempt to prevent agencies using open source software.

Points of debate

26. Currently there is much debate between proponents of open source software, and commercial software. This is a complex and multi-faceted debate, which is only briefly touched on here. Important areas of debate discussed in the following sections include: cost, functionality, interoperability, and security. These factors need to be considered by organisations when choosing software.

Cost

27. As already discussed the business models for open source software and commercial software are different. Debate around calculating the total cost of ownership (TCO) for open source software, and commercial software has been very topical recently.

28. Despite there being no upfront licensing cost associated with open source software, any deployment of software, be it open source or commercial, will attract costs in terms of:

• ongoing software maintenance support;
• configuration and integration with other applications; and
• transition costs including training.

29. Proponents of both open source, and commercial software argue they can demonstrate lower TCO when all cost factors are considered.

30. The absence of licensing costs for open source software is increasingly forcing organisations to assess the opportunities presented by open source software, particularly where they have existing arrangements with commercial software vendors. A major consideration in deciding whether or not to move to open source software is the cost of changing systems, including the interoperation with other related systems.

Functionality

31. Open source software proponents suggest that, given the community input to software development, only the functionality users actually want is built, making its software 'cleaner' (i.e. its software is not made complex through the addition of features they believe are of marginal use).

32. On the other hand, commercial software vendors believe their products provide a greater range of functions that users like (such as formatted email and integrated address books). They argue that commercial imperatives drive them to produce easy to use software with functionality that users desire. They see themselves in the role of providing robust software solutions that suit a wider range of users, and doing it with more commercial 'nous' than open source software developers.

Interoperability

33. Open source software is built using open standards and file formats. Open source software proponents argue that this is desirable as it means content is not tied to specific pieces of software. Therefore, an individual or organisation is not locked-in to a certain software application to ensure it can continue to access files.

34. Commercial software vendors often provide support for proprietary formats as well as their own, and often provide support for open file formats.

Security

35. Security of software has become an increasingly high profile issue over the last few years, as attacks and viruses cause disruption to businesses and homes.

36. Proponents of open source software say viruses have concentrated on weaknesses in commercial software that exist due to poor software design. There is a strong belief amongst open source software proponents that sharing source code promotes rapid development of software and of programmers, and allows early recognition and repair of bugs and security problems.

37. An often-cited example by open source software proponents, is the serious security hole called the 'Ping of Death' that was discovered in all operating systems in 1996. The open source operating system Linux was fixed within hours. Commercial vendors took weeks or months to repair their products, and some of them never did, requiring owners to purchase upgrades.

38. Commercial software vendors consider open source software to be more vulnerable because the code is always open to scrutiny by a malicious person. They argue that dedicated development teams are best placed to ensure security of its products.

39. Open source software proponents are critical of the way commercial software customers are now being required to assent to licences, which invisibly check their rights to open files against central databases on the Internet, and may permit scrutiny of their computers from afar. Commercial vendors are seen as being overly defensive about protecting their intellectual property and secretive about what information can be sent across the Internet and what use could be made of this.

40. This particular concern is shared by risk-averse organisations. The German Federal Ministry of the Interior has negotiated with IBM to supply Linux-equipped machines to the federal, state and local governments. Their drivers are the risk of undetectable access and the opportunity for cost reduction.

NZ government context

41. Naturally, both vendor interests and open source groups are lobbying Governments to take a position on the open-source/commercial software debate, and thereby give one side the advantage in dealing with the lucrative government customer base. In response to these pressures, governments around the world are developing positions/policies with respect to the use of open source software.

42. The policies adopted (or being considered) by overseas governments have a number of similar objectives, as summarised in the table below:

	Objective	Examples
1	Ensure best 'value for money' through encouraging or requiring government organisations to consider open source software options, alongside proprietary options, for information technology procurements (i.e. neutral procurement decisions based on value).	United Kingdom
2	Encourage or require government organisations to use open source software, wherever feasible.	South Africa, Argentina, Italy, Peru, India
3	Seek to avoid lock-in to proprietary software products and services	United Kingdom
4	Use open source software as the default for any government funded research and development.	United Kingdom (exploring this option further)
5	Use open source software as the default option so as to foster local information technology skills, and reduce reliance on foreign software and services.	South Africa
6	Concern over security implications of using a single closed-source software provider headquartered overseas.	Germany

43. The United Kingdom's policy, and South Africa's draft policy represent two major variants of open source software policies:

• United Kingdom policy does not explicitly state a preference for use of open source software. Rather, it reinforces that organisations need to ensure that all options are considered (both open source software and proprietary software), and that value for money is achieved.
• Draft South African policy suggests using open source software as a way to improve the local software market's global competitiveness, whilst reducing any reliance upon foreign information technology skills.

44. Other governments have recently made explicit decisions to move towards wide deployment of open source software in the public sector, for example China and South Korea.

Choosing software

45. An agency's choice of software typically depends on several factors including:

• existing base of software and hardware;
• the familiarity of business and IT staff with particular software;
• the perceived match of the software functionality to business requirements;
• the perceived security of the software;
• interoperability with other software and hardware;
• cost of licensing and ongoing support costs; and
• integration and common licensing arrangements (i.e. discounts) with existing software in the organisation.

46. Given the above considerations, it must be assumed that different government agencies will make different software choices to best suit their requirements. Open source or commercial software choices are both valid, depending on the particular context within which the decision is made.

47. Much information is available, on public websites and from private IT analysis services such as Gartner, to help agencies evaluate their software options.

Use of software in NZ government

48. Both open source software and commercial software is used by government agencies. Government use of open source software appears to broadly conform with that globally. That is, there is significant popularity in the server operating system and web server areas, and very low penetration in terms of the desktop environment.

49. Like the global trend, there is increasing interest around public sector deployments of open source software, and some of the opportunities to realise cost-savings, improve security and so forth. One of the best-known recent examples of open source software use is Housing New Zealand's use of Linux to support its core applications.

50. In many instances, information systems comprise a combination of open source, and commercial software. For example, the New Zealand government portal employs a mix of open source and proprietary solutions. Both Microsoft NT and Linux-based systems run Apache web servers, Microsoft SQL server databases, Java XML applications and an Autonomy search service.

51. The desktop environment is a very visible area of information technology spending by government agencies. Microsoft currently dominates this area. Not unexpectedly, this is an area where significant external interest has been expressed through groups such as OPENZ (NZ Open Source Vendor Group).

Next steps

52. In terms of New Zealand's position with respect to open source software it is proposed, at this stage, that a neutral position be maintained. 'Value for money' and 'fitness for purpose' principles should continue to underlie any software procurement decisions made by government agencies. This position is consistent with that adopted by the United Kingdom (as outlined in paragraph 43).

53. It is proposed that government agencies, when acquiring, upgrading or relicensing software, be encouraged to assess open source alternatives (where these exist), and that they ensure that software choice is based on cost, function, interoperability, and security. The Ministry of Economic Development has been consulted, and agrees this approach is consistent with the government procurement policy.

54. It is proposed that these messages be communicated to departmental chief executives by the State Services Commissioner, and that this paper be published on the e-government website in response to the public interest in the issue.

Recommendations

55. With respect to the use of the open source software in government it is recommended that you:

1. note that open source software is generally a viable alternative to commercial software, and that it is increasingly used in both the private and public sectors globally;
2. note that 'value for money' and 'fitness for purpose' principles should continue to underlie any software procurement decision made by government agencies;
3. agree that government agencies, when acquiring, upgrading or relicensing software, be encouraged to assess open source alternatives (where these exist) and should choose based on cost, functionality, interoperability, and security;
4. note that the Ministry of Economic Development has been consulted and agrees with recommendation 3;
5. agree that the State Services Commissioner write to departmental chief executives drawing their attention the recommendations above;
6. note that the E-government Unit will continue to monitor market trends with respect to open source software, and keep you up to date as required;
7. agree that this paper be published on the E-government website in response to the public interest in the issue.

Brendan Boyle

Director, E-government Unit

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