Open Source by Pedro Jaime

Open Source

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From an investment research perspective, the term "open source software" refers primarily to a set of terms and conditions associated with the software's license. There are dozens of such licenses but those designated Open Source Initiative (OSI)-compliant meet a set of 10 characteristics outlined on the group's web site that capsulize the open source philosophy.

The term "open source" derives from the fact that the software's source code is at least available and in fact ususally distributed with the executable code (the normal way of distributing software). Per one of the typical terms and conditions in an OSI-compliant license, the software can be (1.) "freely" changed and (2.) somewhat freely redistributed (depending on which open source license is used).

Open source software development is relevant to investment research because it reduces the research and development expense of the publicly traded companies that make use of it. Much use of open source involves burying a component or software artefact deep into an otherwise closed-source software product or service (being careful that the open source license permits that use). For example, some version of the Apache HTTP web server is a component of most leading closed-source application servers. Alternatively many publicly traded software publishers and service providers redistribute a discrete piece of open source software instead of developing their own software for that function. Both approaches save the public software or services company from reverse engineering or otherwise creating from scratch a particular commodity function, or licensing the software from a closed-source software publisher.

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