Economic Impact of Free and Open Source Software – A Study in India

Rahul De'Hewlett­Packard Chair Professor

Indian Institute of Management Bangalore

INTEROP Mumbai7­9 October, 2009

September 2009 Economic Impact of FOSS2

Overview

● Scope of Project● Highlights of Sample Case Studies● Analysis of Economic Impact● Policy Implications● Conclusion

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Scope of Project

● Case studies of 20 organisations that have adopted FOSS

● Examine cost savings, administration and innovation with FOSS

● Exploratory study

20%

55%

15%

5%

5%

Type of Organisation Studied

Government Dept Large Firm SMENGOHigher Ed

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Case Study: IT @ School

● The IT @ School project of Kerala replaced Windows software with FOSS on 50,000 desktops in schools across the state. Tangible benefits amounted to Rs 49 crores ($ 10.2 million).

● Intangible benefits:● easier development of support software ● local language customisation● improved teacher confidence

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Case Study: Great Market

● Great Market (name changed), a large e­commerce firm, adopted FOSS for servers, MIS development, document management and for desktops. The savings from desktops alone came to Rs 30 lakhs ($ 63 k).

● Intangible benefits:● increased security● scalability and stability ● access to state­of­the­art technology

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Case Study: Life Insurance Corporation of India

● Life Insurance Corporation (LIC) is one of the largest insurers in India, with an IT infrastructure of 3500 servers and 30,000 desktops, saved about Rs 42 crores ($ 8.75 million) by adopting FOSS.

● Intangible benefits: ● ability to experiment with new technologies

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Case Study: New India Assurance Company● The New India Assurance company, a general 

insurance firm, has 1100 offices, and an IT infrastructure of 1500 servers and 7000 desktops; save about Rs 80 crores ($16.7 million) per annum in tangible costs 

● Intangible benefits:● increased security● control over pirated software● easy updates

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Case Study: GGG

● GGG (name changed) is a medium­sized e­commerce solutions IT firm that relies heavily on FOSS. GGG saved about Rs 36 lakhs ($ 75k) by using FOSS on its desktops.

● Intangible benefits: ● improved performance

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Case Study: IT for Change

● IT for Change, an NGO with 30 employees. Use FOSS extensively on all servers and desktops. Estimated tangible savings of about Rs 1.2 lakhs ($ 2.5k) per annum 

● Intangible benefits:● help with advocacy on IT benefits● reduced threat of viruses ● easy upgradation ● convenience of distribution

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Case Study: Institute of Informatics and Communication

● IIC is an institution of higher education that has adopted FOSS. The tangible benefits for an infrastructure of 100 desktops and 5 servers is about Rs 17.5 lakhs ($ 36k).

● Intangible benefits:● a learning environment of free and open thinking 

and innovation●  ability to choose technology, not driven by 

vendors

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Why Adopt FOSS?

● The most important reason for adopting FOSS is to save costs on the acquisition of IT. This factor was evident, with varying degrees of importance, in 18 of the 20 organisations studied.

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How was Economic Impact Measured?

● The economic impact of FOSS was measured by three principal means:● FOSS as a substitute for more expensive desktop operating 

systems and office productivity applications● FOSS as a substitute for more expensive server software ● FOSS enabled cost savings from complementary products 

such as anti­virus software required on Windows desktops

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Cost Savings Estimated from Retail PC Sales● Savings on replacement of operating system 

software with FOSS products on 50% of forecast retail PC sales

Projected retail PC sales in 2010 5.47 million units

2.735 million units50% of projected retail PC sales in 2010Savings per PC for operating system costs Rs 3600 per unitTotal savings for OS software at 50% projected sales of retail PCs in 2010

Rs 984.7 crores

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Cost Savings Estimated From Retail PC Sales● Savings on replacement of office software tools with 

FOSS tools on 50% of forecast retail PC sales

2.735 million units50% of projected retail PC sales in 2010Savings per PC for replacement of Office Suite with FOSS products Rs 16,500 per unitTotal savings for office software at 50% projected sales of retail PCs in 2010

Rs 4,515.2 crores

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Cost Savings Estimated from Enterprise PC Sales● Savings from replacement of proprietary software 

with FOSS on 50% of forecast sales of enterprise PCs

Projected enterprise PC sales in 2010 4.64 million units

2.32 million units50% of projected enterprise PC sales in 2010Savings per PC for replacement of operating system and office software with FOSS products Rs 20,000 per unitTotal savings at 50% projected sales of enterprise PCs in 2010

Rs 4,638.8 crores

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Total Estimated Savings

● Total estimated savings from use of FOSS on forecast PC sales in 2010

Total

Savings from replacement of operating system software with FOSS on retail sales of PCs Rs 984.7 croresSavings from replacement of office tools with FOSS on retail sales of PCs Rs 4,515.2 croresSavings from replacement of proprietary software with FOSS on enterprise sales of PCs Rs 4,638.8 crores

Rs 10,138.7 crores

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Cost Savings Estimated from Enterprise Server Sales

● Savings from use of FOSS on forecast server sales in 2010. 

Projected total server sales in 2010 138000 unitsSavings per server with usage of FOSS products (a conservative estimate) Rs 10,000 per unitTotal savings based on projected sales of servers in 2010

Rs 138.0 crores

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Savings From Cost of Anti-Virus Software

● Anti­virus software sales in 2010 is likely to touch Rs 2000 crores ($416 million). This is a conservative estimate based on ceteris paribus assumptions (that all else will remain the same). This entire amount is a cost that can be avoided if FOSS products are adopted.

● Cost savings from anti­virus software is lower than the damage wrought by virus attacks and consequent productivity losses.

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Intangible Benefits

● FOSS has very strong intangible benefits ● Increased security; reduced threat of viruses● Control over pirated software● Access to state­of­the­art technology● Ability to experiment and innovate● Choice of technology not driven by vendors

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Policy Implications

● Governments should actively encourage use of FOSS in schools. Across India the savings can be to the extent of Rs 27 billion

● Public offices and departments should ensure FOSS technologies are included in all IT acquisition tenders and request­for­proposals

● Government should inform/educate public on benefits of FOSS; create labs for public to sample and learn FOSS

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Conclusion

● FOSS is a mainstream alternative to proprietary software

● Our computations show that the tangible benefits of FOSS are significant● In the year 2010, if FOSS is adopted at 50% levels across 

the economy, the total savings are likely to be about Rs 10,139 crores ($ 2 billion )

● FOSS has immense intangible benefits that can have a strong impact if there is widespread adoption

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Thank you very much!