The potential - a steady revenue stream

The World Runs on Open Source, but Who’s Paying for the Gas?

Open source developers face a unique challenge that is uncommon with other professionals. They spend thousands of hours of their spare time creating incredible software used by millions. In exchange for their efforts, they are bombarded by a torrent of bug reports, pull-requests, support and feature requests. Years of waiting for donations, and next-to-zero compensation for their contributions, is making many of them think again about putting in the same amount of effort.

This article is the result of more than a year of research and summarizes some of the insights we have gained and our projections for the open source economy in the near future.

Background – The growth of the gig economy

2020 opens with some interesting economic trends. The gig economy is expanding three times faster than the US workforce as a whole (Forbes), affecting over 40% of US-based workers. In the graphic design or digital marketing industries for example, where financial compensation is usually lower than tech, more and more workers are choosing the freelance path, citing independence, better salaries, and an improved work-life balance.

And yet, even with superior compensation, constant top ranking in the “Fortune 100 Best Companies to Work For” and other treats such as time to work on personal projects (Google) and 4-day work weeks (Microsoft Japan) – more and more software developers choose to leave the corporate world behind and go solo. Marketplaces such as UpWork , report that more people than ever see freelancing as a long-term career path, many of which are software developers.

Why are developers leaving their corporate comfort zone?

Motivation matters

My team and I were looking for an answer to this question when we interviewed over 130 software developers. One of our questions was: “What has motivated you to sell your software development skills as a freelancer, on platforms such as Fiverr and Up-Work?”. The primary factor cited was ‘The freedom that comes with running their own business’. Self-employed developers set their own schedules, get to choose their projects and clients, and work from the comfort of their home – unlike a standard 9-to-5.

It appears that in 2020 working remotely is almost a standard in the IT industry,  and being a corporate developer is not the favored career path for many. The deeper we dove into this notion, another facet of the story was revealed – there was something more, hidden in plain sight. And this is where we discovered the link to open source.

Service vs. Product

The main difference between software developers and other freelancers is the value they create. While a graphic designer offers his service, technically pricing his hours, the software developer can offer something more than just time; He can offer his code as a product

Open-source developers have the unique possibility to turn a 1 to 1 compensation ratio (1 hour’s work equals 1 hour’s pay) into a 1:n ratio –  1 hour’s work can equal n clients who purchased their product.

Many open source developers already have thousands and even millions of developers and companies using their code, many of them commercially. The next logical step for developers after freelancing – is productizing and monetizing their open-source projects. Open source monetization is the future.

Should companies pay for Open-Source?

The fact is they’re already paying – a lot.

In the absence of a healthy economy based on supply, demand, and price, open-source suffers from critical market failure. Many open source developers we interviewed reported that burnout, lack of time and no compensation are the main reasons for not maintaining their existing projects or creating new open-source projects. Thousands of open source projects are abandoned every year by their developers, leaving their users in a bind. That is a big issue for the companies who spend billions of dollars every year for handling obsolete, undocumented and generally unmaintained open source projects used in their commercial software. When a company assigns a $50/hr developer to fix a bug in a ‘free’ piece of software, it stops being free. Why not pay the original developer for a great open source project that frees corporate resources to tackle mission-critical tasks?

The potential – a steady revenue stream

Companies need functional open-source projects and have the interest to reduce expenses for maintaining them – while developers have the product, the users and the tools to monetize it. This intersection of interests is unavoidable – and will happen soon. Developers are waking up.

Our research indicated over 200,000 open-source projects, excluding huge projects, very small or ones that are not suitable for commercial use, with a revenue potential of $19B annually.

Considering 98% of all software projects rely on open-source connections or core concepts in one form or other (source: GitHub), and with over 40M developers on Github, including 10M new users in 2019 – open source is nearing a boiling point. Without a viable solution for motivating open source developers through financial rewards, the entire open-source ecosystem might become unsustainable.

Conclusion

In the next few years, companies will focus on developing core functionality for their products, and scaling in-house teams down in favor of paid open source projects for more ubiquitous code modules surrounding the core. More open-source developers will be doing what they love, maintaining their projects for their paying clients, and share more, better code with the open-source community.

I promise to keep updating you with our mission: empowering developers and make a better open-source economy.

Netanel Mohoni

Co-Founder, CEO xs:code

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