Open Source

Open source refers to an entire community of software developers that refuses to maintain its source code as a secret. Its members publish their source code where all can see it. Programmers and software developers can inspect this source code, extend it, modify it, and use it as a model for future software development. Open source developers, like proprietary software companies, circulate their software subject to licences outlining conditions to which the “buyer” must agree. Generally the software is free, and you can do virtually anything you want with it as long as you don’t distribute it. If you do distribute software then you need to do so under the terms of the licences.

For example, the General Public License (GPL), try to enforce the community ethos through a “copyleft” clause. Developers who incorporate any GPL-licensed code into their own software must release their new products under the GPL, or risk violating the terms of their licence.

Other open source licences are less restrictive than the GPL and allow developers to incorporate open source code into their own products with secret source code.

Adoption of open source is gradually becoming so widespread, that the trend is set to have a disruptive effect on technology and innovation, such that by the year 2012 it will become quite mainstream.

Companies need to familiarise themselves with the open source licensing requirements, and whenever they are developing technology, consider whether or not open source software is appropriate to use bearing in mind whether the technology being developed is going to be differentiating for their business or not.

A differentiating technology is something like Amazon's data mining software which enables Amazon to inform consumers that people who bought such and such a book also bought something else. This is differentiating software that is responsible for generating 50% extra sales for Amazon.

Non differentiating technology, represents the vast majority of technology that most businesses use as part of their infrastructure- such as word processing software. As open source software comes with licence obligations to share or disclose code in certain circumstances, it makes sense to only use open source code in an organisation's non differentiating technological developments.

Unbeknown to many larger companies, staff often go and grab open source code off the internet and use it in corporate development projects. This can have undesirable consequences for companies who may then become subject to open source licensing obligations to disclose.

So, it is essential for companies to find ways to monitor internal development projects to ensure that they are aware when open source is being used, and to ensure that open source is only used when it fits in with the company's objectives, and in particular is not used for development of differentiating technology.

Before selling a company it is prudent to do an internal 'due diligence', to find out whether the business is using open source and other unlicensed third party software code. This is so commonly found to be happening as to be quite expected by buyers. However, sellers being less sophisticated, are shocked when they find out that their software incorporates open source or unlicensed code. In practice, this frequently results in the seller being considerably knocked down on price as a result.

Far better therefore for the seller to put its house in order before a sale by running some checks to identify and rectify problems outside the high pressure environment of a sale. Rectification might involve, for example, the need to rewrite offending bits of code by engaging new developers to rewrite elements of the program code in a clean room environment. To cure the original problem, this must be done correctly and could take months to achieve.

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