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Economics of open source The economic impact of open source models is going to be very high, not only in the software industry, but in society in general. In this section, we discuss in some detail some of the more foreseeable issues related to this impact. Some of them are just projections from current trends, but some others have already arrived. To begin with, several new economic models for open source projects will be presented (externally funded, internally funded, unfunded, and internally used). Later on, the issue of total cost of ownership will be discussed in subsection 5.5. In subsection 5.6 some discussion on the macro-economic consequences of widespread use of open source will be introduced. To finish this section, some impressions on the future of the software market, considering open source models, are discussed in subsection 5.7. The subsections on new economic models are important because many traditional models of the software industry are heavily based on proprietary software where the income is directly related to per-copy price (particularly in the case of shrink-wrapped software). With some exceptions, these traditional models are not viable with open source software, since income cannot come from selling copies of the software (freedom of redistribution tends to set the price at the point where marginal cost of reproduction is near zero). Therefore, open source business must look for other sources of income. The taxonomy of models presented in this section is not just an analysis of currently existing models, even considering that some of them have been already tested in the industry. On the contrary, we have tried to create as complete as possible a categorization of models that can be self-sustaining, or at least feasible from a business point of view. However, real examples are added to each categories wherever we know of them. Interested readers can refer to [7] for another taxonomy of open source business models, more focused on what is currently available, and to [8], which includes the results of a survey about how do open source business behave. In addition, in appendix B we provide information about some real business based on free software, which can be used as case examples. New economic models: Externally funded ventures We consider in this category groups or companies which develop open source software through the initiative (at least in the financial sense) of some external organization. Usually those external entities determine how the funds are to be spent, and where the development efforts are headed. The developer entity just follows those more or less strict guidelines. In some sense, it could be said that the external entity `sponsors' the development of some given open source software. In this category, we can distinguish at least three models, according to who funds the project and why. We have called them public funding, `needed improvement' funding, and indirect funding. Public funding Working groups or individuals receive funding for the development of a good software product, documentation, test cases or whatever. Usually, the only constraints imposed by the funding entity are that funds must be used to complete the project. This is typical of large computer science projects, and the funding usually comes from universities or from national science grants. In fact, many large projects in radioastronomy, computational chemistry, and biology are funded this way. In addition, some consortiums for the development of Internet tools and technologies have (or have had) such a funding structure. It is important to notice that in these cases the funding institution is not expecting to recover the investment, or to directly benefit from it. Usually, some expectation of social improvement is the reason for the funding. `Needed improvement' funding A company or organization may need a new or improved version of a software package, and fund some consultant or software manufacturer to do the work.
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