Free and Open Source: Economics, not Politics


Paw Prints: Writings of the maddog

Nov 02, 2016 GMT
Jon maddog Hall

“Open Source” has been prominent in Brazil for over ten years. During that time Free and Open Source Software and Hardware (FOSSH) has become associated with the PT political party. However, the use of Open Source Software, Hardware and Culture is not a political issue, but an economic issue that benefits every Brazilian citizen, and therefore should be embraced by every Brazilian political party. This paper will outline why FOSSH should be a major policy of every Brazilian political party.  While it is answering a particular current problem in Brazil, it can be used in almost any country.

In the paper below, the term “end user customer” is the actual user of the solution, whether it be business, education or government.

Brazilian People Can Make Money With FOSSH

A misconception of FOSSH is that people can not make money with “Free Software”. In reality people can make money with FOSSH all the ways that people can make money with closed-source software. People can be paid for writing the software, installing the software, integrating the software, teaching people how to use the software, and creating solutions with the software. People can even charge for the software itself, but the various licenses of “FOSSH” tend to limit the amount of money that can be charged for the software directly.

There is one way that Brazilian people can make money with FOSSH that they can not make money on closed-source, proprietary software, and that is by changing the FOSSH software to meet the end-user customer's needs. To change the software you need access to the source code and in the case of closed-source software this source code is held by the companies that make it, which are typically not in Brazil and therefore generate no jobs for Brazilian programmers.

FOSSH Keeps Money in Brazil

By purchasing software created by companies outside Brazil, Brazilian money leaves Brazil directly affecting Brazil's balance of trade.

The Business Software Alliance report “2016 BSA Global Software Survey” published in May of 20161 estimates that in the year 2015 forty-seven percent of desktop PC software was unlicensed, representing a loss of value of 1.77 Billion USD. If this figure is expanded to cover the value of all desktop PC software the total value would be 3.77 Billion USD with approximately 2 Billion USD of that currently paid by Brazilian companies and individuals for properly licensed desktop PC software. Assuming that most of that desktop software is produced outside of Brazil, it means that Brazil is giving up a 3.7 Billion USD market to companies outside of Brazil and actively sending 2 Billion USD outside its borders.

Note that this 2 Billion USD is only for the current desktop PC software, and does not include server software or software used for embedded systems, cell phones and other software. Nor do these figures include services purchased from the companies that make the closed-source software.

Finally, the report also shows that the amount of unlicensed software over the years has been decreasing in percentage, from 56% in 2009 to 47% in 2015. While it is anticipated that the percentage will never get to zero, both the increasing percentage of licensed (and paid) software and the increasing use of the closed-source software means that the total value of money leaving Brazil keeps going up dramatically year after year.

FOSSH Means Local Jobs for Local Programmers

The use of FOSSH to create solutions for end user customers means that money that would have been spent on software royalties to foreign countries could instead be spent on employing local programmers to change the software to better meet the needs of the end user customers.

Assuming only the 2 billion USD sent outside of Brazil for desktop PC software, this could pay each of 20,000 Brazilian programmers a salary of 100,000 USD per year.

However, one should recognize that these programmers would be buying local food, have local housing and pay local taxes. The people receiving this money might then require more software to run their business, their schools and the government, which would generate more programming jobs.

Moreover, if most of these programming jobs are recognized as being new jobs, it means that 20,000 additional people are now employed, creating lower unemployment and saving the government money.

Once the money leaves Brazil, however, job creation abilities are reduced, if they occur at all.

Existing Brazilian Companies Can Make Money With FOSSH

There are many companies that currently make money selling closed-source, proprietary software. The companies may or may not be licensed representatives of large closed-source companies.

These companies, with the proper training and expertise, could also make money with FOSSH products and in many of the same ways as they do with their current closed-source business.

Their issue, of course, is that they have built an expertise and perceived value around their (very expensive) closed source training, and do not want to invest in FOSSH skills that would allow them to address the FOSSH market.

The truth is that the additional training to take good people from being closed-source programmers and support people to FOSSH programmers and support people is not that great, and many companies and governments have trained their people to make that change in a very short period of time.

Better Local Jobs Means Less “Brain Drain”

Brazil provides tuition-free education through its Federal University system and through scholarships to private universities. However, after the students graduate they look for jobs in Brazil. Many of the interesting jobs in computer hardware and software are in Silicon Valley, Redmond Washington, Taiwan and Europe, for these are the “hot beds” of computer software and hardware creation. Therefore a large number of good employees leave Brazil for “interesting” jobs in these geographical areas.

FOSSH means that graduates can get “interesting” jobs in Brazil. Working to improve FOSSH software and hardware to meet the exact needs of the end users means that the Brazilian engineer could work on compilers, operating systems, databases and other complex software just as if they were working in Silicon Valley and Redmond, Washington.

Less “Brain Drain” Means More Hi-Tech Business

Attracting high-tech companies to Brazil requires a pool of talented, trained engineers and technical support people so the high-tech companies do not have to “import” people to Brazil. If Brazil's best talent leaves Brazil for other countries, then these companies will not find the people they need and they will tend not to open up facilities inside Brazil.

Good FOSSH technical people tend to be easy to spot, since their work is done in the open and can be qualified and quantified easily. Companies are more easily convinced to come to Brazil if there is an active FOSSH community of good developers.

FOSSH Allows Better Education

Using closed-source software and hardware to teach students only teaches them how to use the software and hardware to solve the problems they have. The students typically can not see how the software or hardware actually solves the problem. Nor can the students actively participate in making the software or hardware solution better.

FOSSH not only teaches the students how to use computers to solve their problems, but offers them the opportunity to see how the software and hardware works and to join projects in making the software and hardware better.

FOSSH Allows Better National Security

In recent years it has been shown that various agencies in the United States have been tampering with closed source software and solutions to spy on various people, including leaders of Brazil. As long as the software and hardware are not able to be inspected for trap doors or other malware, Brazil will be at the mercy of other countries.

Likewise Brazil should be able to completely inspect the software, firmware and hardware that goes into their military installations, their power grid, telephony systems and other critical systems. This can not be done with closed-source, proprietary code, not even with “services” offered by certain closed-source companies.

FOSSH Gives Better Security

Many studies have been generated about whether closed-source code is more secure than FOSSH. In reality neither types of code are really secure. There always is some type of problem whether the code is “open” or “closed”.

However, FOSSH tends to be very rapidly patched, and the source code patch is applicable even if the hardware is not “standard” or the software system is out of warranty or support.

Note that although many tens of thousands of people in Brazil continue to use Microsoft Windows XP, Microsoft is not patching it any more, so security holes go unpatched forever.

As the BSA report mentions, 47% of PC desktop software is unlicensed, and therefore does not receive timely security patches. This leaves the software open to viruses, Denial of Service (DoS) attacks and also allows the unpatched software to be used as DoS “bots”. FOSSH is patched freely (does not need a “service contract”, and therefore has less of a chance to be compromised over long periods of time, or to be used as a “bot”.

Closed-Source Licensing Is Costly and Not Flexible

The standard licensing of much closed-source software (generally known as the “End User License Agreement” or “EULA”) only really allows the end user to use the software and is not transferable to a new user. This means that most institutions have to have employees who check to make sure the computers in the facility are properly licensed for the software in the facility. This can be very tedious, time-consuming and expensive.

Most EULAs do not allow a new user of second-hand or recycled computers to use the same software that came with the computer, even if the old owner buys new licenses for their new machines. Therefore either the user of the second-hand machine “pirates” the software (either on purpose or innocently) or they have to buy some very expensive new copies of the software, assuming that new software is available for the older machines.

FOSSH Protects Against Embargo

Software and Hardware are no longer luxuries in running a country. A country the size of Brazil should be able to maintain their critical infrastructure on their own, or in conjunction with critical allies.

Certain pieces of desktop software are only created in one or two places in the world. If the countries that control these companies decided to create an economic embargo against Brazil, this embargo would damage Brazil's ability to run critical support roles. Examples of the effects of embargo can be seen in Cuba and in Vietnam (before Bill Clinton dropped the embargo against Vietnam).

FOSSH is developed around the world, with the source code of the software kept on many servers (including servers inside of Brazil). It would be hard for one country to “embargo” FOSSH.

Likewise in the age of terrorists, the distributed nature of FOSSH development gives better protection of the ability to keep creating FOSSH versus the case of terrorist attack on the company that designs and produces critical software and hardware.

FOSSH Encourages Innovation and Creativity

By using FOSSH to create research, advanced development and prototypes, innovation and creativity leap forward.

In using closed source proprietary software to innovate, a fledgling company has to divert resources to buying software whose functionality could otherwise be pulled down from the Internet at FOSSH.

Development tools, office products, ERP systems all have good FOSSH solutions that could save a young company hundreds of thousands of USD in start-up costs.

As the company develops their product, they may find that they have to hire lawyers to negotiate contracts for closed-source software, which takes both time and money. FOSSH licenses are well understood and flexible, so both offer quicker time to “resolution” and less money spent on legal negotiations with companies.

Many times a solution created by a company is only a relatively small piece of functionality, but depends on other common pieces of functionality that are FOSSH. Instead of having to develop or purchase this common functionality, FOSSH can “just be used”.

Gratis Closed-Source Software Is Never Really Gratis

Many times companies will give “gratis” licenses for closed-source code to educational institutions, government institutions or other hierarchical institutions, so these institutions will accept the licenses and have their students, employees or customers be forced to use them. The institutions think this is good, because they do not have to pay for the software.

They are wrong. They still pay for the closed-source software in many ways.

The first way that “gratis” software has a price is that suppliers to the institutions tend to use the same software for compatibility. Text documents, spreadsheets and presentations “transfer better” when the institutions suppliers or customers use the same software as the institution. The problem is that the suppliers and customers do not receive the same discounts or gratis licenses as the institution, and therefore they have to pay for the software that the institution gets “gratis”. This raises the price of the goods sold to the institution, and therefore the institution ends up paying for the software due to increased cost of goods. Computer companies have understood and taken advantage of this for years.

Often a “gratis” license of software for educational purposes does not extend to the use of that code by students for cooperative education or after-school work, forcing the students to have to pay for a license of the “gratis” software anyway.

The second way that the “gratis” software and hardware is not really “gratis” is through charges for service and upgrades. Many times an institution will accept “gratis” licenses for software just to find that they owe massive amounts of money for software upgrades in one or two years time.

FOSSH Usually Gives Better Return On Investment (ROI)

Today the “Total Cost of Ownership” of FOSSH has been shown to be about equal to closed-source solutions. While FOSSH typically has no up-front expense for royalties to a company, the support people (systems administrators, programmers, etc.) that know FOSSH typically get paid a higher wage than their closed-source counterparts. This is due both to scarcity of the FOSSH support people (easily fixed by an aggressive training program), but also because their expertise in developing solutions for customers usually is higher than their closed-source counterparts.

By allowing Brazilian companies to tailor the source of FOSSH, it means that the solution can better meet the needs of Brazilian users. Whether it be the language used in prompting, or the translation of the documentation itself, the monetary units used in the solution or the way of doing business, the ability to make needed changes in a timely fashion becomes the ability of the end user customer and not of the supplier of the closed-source software.

FOSSH typically gives better Return On Investment (ROI) because the software and hardware are more flexible and can be tuned to better meet the needs of the end user customer.


The points put forth in this paper have all been economic points, and not political points. Each one of the issues brought forth should be supported by any political party. In order to illustrate this, which politician would say:

  • Let us send 3.7 Billion USD outside of Brazil every year.
  • Let us not employ Brazilian programmers to make our software meet our needs. Instead let us give the money we might have paid the Brazilian people to foreigners.
  • Let us buy binary closed-source software so the NSA (KGB, etc.) can spy on us
  • Let us send our best programmers to Silicon Valley and Redmond Washington for “interesting jobs”
  • Let us put our computing future into the hands of Redmond, Washington and Silicon Valley.
  • Let us say to the world “Do not come to Brasil to start Hi-Tech companies”

Of course no politician would say these things, as it would be political suicide, yet if politicians stop supporting the development of FOSSH inside of Brazil and simply make blanket licensing deals with large foreign-owned closed-source companies (even those who claim they “love open source”) behind closed doors and without proper rationale, then the politicians are not helping their country and the electorate has every right to question why these blanket licensing deals are being made.

Decisions based on politics (and not economics) should be remembered by the voters in the next voting cycle.


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