20050729 present

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An Economics research structure : Economics of Free and Open Source in Thailand

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20050729 present

  1. 1. Economics of Free and Open Source in Thailand เศรษฐศาสตร์ซอฟต์แวร์เสรีและโอเพนซอร์สในประเทศไทย โดย กานต์ ยืนยง โครงการเศรษฐศาสตร์ธุรกิจ มหาวิทยาลัยธรรมศาสตร์
  2. 2. Contents <ul><li>Study’s structure </li></ul><ul><li>Chapter 1 : Introduction </li></ul><ul><li>Chapter 2 : History & Development and Literature review </li></ul>
  3. 3. Study’s structure
  4. 4. Chapter 1 : Introduction <ul><li>An important of the study </li></ul><ul><li>Objectives </li></ul><ul><li>Scope </li></ul><ul><li>Source of information </li></ul><ul><li>Methodology </li></ul><ul><li>Benefits </li></ul>
  5. 5. Source: รายงานการพัฒนาขีดความสามารถในการแข่งขันของไทย NESDB ( กลุ่มอุตสาหกรรมซอฟต์แวร์ )
  6. 6. Source: รายงานการพัฒนาขีดความสามารถในการแข่งขันของไทย NESDB ( กลุ่มอุตสาหกรรมซอฟต์แวร์ )
  7. 7. Source: รายงานการพัฒนาขีดความสามารถในการแข่งขันของไทย NESDB ( กลุ่มอุตสาหกรรมซอฟต์แวร์ )
  8. 8. Rising of FOSS worldwide Source: NetCraft http://news.netcraft.com/archives/web_server_survey.html
  9. 9. Rising of FOSS worldwide
  10. 10. Objectives of the study <ul><li>To apply economic theory in order to explain : </li></ul><ul><ul><ul><li>Why FOSS work and exists </li></ul></ul></ul><ul><ul><ul><li>How can FIRM involve in FOSS </li></ul></ul></ul><ul><li>To study and compare a development of FOSS between Thailand and Foreign </li></ul><ul><li>To study a direction to develop FOSS industry in Thailand, both Gov’s policy and Firm’s strategy </li></ul>
  11. 11. Scope <ul><li>A development of FOSS, with influences people both in government agency, firm and private, during 1999 – present. </li></ul>
  12. 12. Source of information <ul><li>Secondary data via publish materials ie. Journal, magazine, newspaper, etc. </li></ul><ul><li>A survey and interview. </li></ul>
  13. 13. Methodology <ul><li>Quantitative approach </li></ul><ul><li>Qualitative approach </li></ul><ul><li>Descriptive approach </li></ul><ul><ul><ul><li>A comparison between fact from survey and theorem prediction. </li></ul></ul></ul>
  14. 14. Benefits <ul><li>Government : Get a basic idea and knowledge in conducting a policy. </li></ul><ul><li>Firm : Get a basic idea and knowledge in order to set its strategy. </li></ul><ul><li>Researcher : Get a basic literature, in order to improve a better knowledge. </li></ul>
  15. 15. Chapter 2 : History & Development and Literature review <ul><li>Meaning of FOSS </li></ul><ul><li>History and development </li></ul><ul><li>Definition </li></ul><ul><li>Economics theory to explain FOSS </li></ul><ul><li>Literature review </li></ul>
  16. 16. Meaning of FOSS <ul><li>Free software with available source code. </li></ul><ul><li>Community is significant. </li></ul><ul><li>Success or failure of the software depend on community activeness. </li></ul>
  17. 17. History & Development <ul><li>Birth of Unix era </li></ul><ul><li>BSD era </li></ul><ul><li>Linus Torvalds and Linux </li></ul><ul><li>Open Source era </li></ul><ul><li>Community role </li></ul><ul><li>Software in different form </li></ul><ul><li>Community’s character </li></ul>
  18. 18. Community’s character Source : Open Source : Beyond the Fairy tales โดย Richard P. Gabriel และ Ron Goldman
  19. 19. Community’s character <ul><li>Available of source code </li></ul><ul><li>Distribution of owner and control </li></ul><ul><li>Scarcity of money, B/W and computer power but not man power </li></ul><ul><li>Limited lock-in </li></ul><ul><li>Software is not perfect;Tolerable </li></ul><ul><li>Open KPI </li></ul><ul><li>Professional attention </li></ul><ul><li>Elegance code </li></ul><ul><li>Ignorance of unskilled users </li></ul>
  20. 20. Definition of FOSS <ul><li>Open Source Initiative : Focus on collaboration and openness </li></ul><ul><li>Free Software Foundation : Focus on Freedom </li></ul>
  21. 21. Economics Theory <ul><li>Near zero marginal cost </li></ul><ul><li>Network externalities </li></ul><ul><li>Critical mass </li></ul><ul><li>Public goods & Free-riding </li></ul>
  22. 22. Near zero marginal cost Source : Microeconomics : Paul Krugman และ Robin Wills ,2004
  23. 23. Network externalities <ul><li>More users create more benefits. Consider Fax, Telephone and Mobile. </li></ul><ul><li>On software : </li></ul><ul><ul><ul><li>Pool of experienced users and developer </li></ul></ul></ul><ul><ul><ul><li>More application available </li></ul></ul></ul>
  24. 24. Critical mass Source : Microeconomics : Paul Krugman และ Robin Wills ,2004
  25. 25. Public goods & Free-riding Source: R.van Wendel de Joode et al. 2003
  26. 26. Literature review <ul><li>Explain why hacker produce public goods. R. van Wendel de Joode et al. (2003) </li></ul><ul><li>Empirical study. Gosh, Rishab Aiyer et al. (2002) </li></ul><ul><li>Balance between community and firm. R. van Wendel de Joode et al. (2003) </li></ul><ul><li>Limitation in developing country. Weerawarana, Sanjiva and Weeratunga, Jivaka (2004) </li></ul><ul><li>Core Literature. Bessen, James (2004) </li></ul>
  27. 27. Why hacker produce public goods <ul><li>Low contribution cost; internet infrastructure. </li></ul><ul><li>Intangible benefits: </li></ul><ul><ul><ul><li>Direct needs </li></ul></ul></ul><ul><ul><ul><li>Fun </li></ul></ul></ul><ul><ul><ul><li>Reputation </li></ul></ul></ul>
  28. 28. Empirical study Source : Free/Libre and Open Source Software : A developer survey โดย Rishab Aiyer Gosh et al. (2002)
  29. 29. Balancing : Firm force <ul><li>Patents </li></ul><ul><li>Hire core developer </li></ul><ul><li>Free-riding </li></ul><ul><li>Commercialization </li></ul>
  30. 30. Balancing : Community force <ul><li>Law approach : GPL, no prove in court yet. </li></ul><ul><li>Non law approach : </li></ul><ul><ul><ul><li>Beachheads </li></ul></ul></ul><ul><ul><ul><li>Boycott </li></ul></ul></ul><ul><ul><ul><li>Competition development </li></ul></ul></ul><ul><ul><ul><li>Power play </li></ul></ul></ul><ul><ul><ul><li>Release early, release frequently </li></ul></ul></ul>
  31. 31. Limitation on developing country <ul><li>Problem in IP enforcement </li></ul><ul><li>Lack of low cost and efficient internet infrastructure </li></ul><ul><li>Low education infrastructure </li></ul><ul><li>Freedom to access information </li></ul><ul><li>Lack of English language understanding </li></ul><ul><li>Lack of high skill developer pool </li></ul>
  32. 32. Core Literature : Firm involvement <ul><li>Open Source Software: Free Provision of Complex Public Goods. Bessen, James (2004). </li></ul><ul><li>Based on model of innovations : Agion & Tiroles (1994) </li></ul><ul><li>Which based on : </li></ul><ul><ul><ul><li>Foundation of incomplete contracts ; Hart & Moore (1999) </li></ul></ul></ul><ul><ul><ul><li>Complexity and renegotiation : A foundation for incomplete contracts ; Segal (1999) </li></ul></ul></ul><ul><ul><ul><li>A recent development as theory of incomplete contracts , pioneer by Oliver Hart </li></ul></ul></ul><ul><ul><ul><li>Branch of contract theory and information economics </li></ul></ul></ul>
  33. 33. Assumption about software <ul><li>Software is a complex goods. </li></ul><ul><ul><ul><li>m features product, use or not use generate 2 m different use-product. </li></ul></ul></ul><ul><ul><ul><li>Testing, Debugging and maintenance account for 82% of the cost of software. </li></ul></ul></ul><ul><ul><ul><li>Complexity-related cost also limit the ability of packaged software to meet all consumer needs. Some turn to custom programming or self develop. </li></ul></ul></ul><ul><li>Contract issue: </li></ul><ul><ul><ul><li>To write a contract to cover all features equal write the code itself. </li></ul></ul></ul><ul><ul><ul><li>Incomplete contract : certain “transaction costs” prevent some aspects of the future trade from being contracted ex ante (renegotiation in ex post). </li></ul></ul></ul>
  34. 34. Self development vs. 1 on 1 contract Customer Developer invest Sell code Customer Self development
  35. 35. Pre-package software Developer Sell package Choice 1 : Customer get prepackage Profit of software firm Choice 2 : Customer self develop Firm optimum price Customer Customer Customer Customer Customer
  36. 36. Proprietary extension : API Developer Customer Customer Customer API develop Sell Pre package Pre package Pre package
  37. 37. Free/Open Source Customer Get source m* feature Develop m*+1 feature and contribute back Pool of FOSS developer and source
  38. 38. Conclusion <ul><li>FOSS is a Prepackage’s complement, not a direct competition. </li></ul><ul><li>FOSS is suitable for skilled customer , which is niche market. </li></ul><ul><li>Prepackage will focus to unskilled customer, which is mass market. </li></ul><ul><li>Prepackage should decrease price; API won’t exist. </li></ul><ul><li>FOSS increase social welfare. </li></ul>

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