TOWARDS A EUROPEAN SOFTWARE STRATEGY

REPORT OF AN INDUSTRY EXPERT GROUP Open Source Software Work Group March 2009

V3.0

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Executive Summary

The OSS workgroup has been very active and probably like all other workgroups, we felt that our ideas refinement and passionate debates were only limited by the deadline set for this work.

Our group included members from various sectors and line of thoughts, The group included a non-profit centre of competence for OSS, industry representation with partial or high OSS degree for their revenue model, as well as organisations that base their entire revenue on the proprietary mode. As a consequence some of the views and proposed actions are not backed by all. When this occurred, the views particular to some group members have been identified as such and can be easily located in the report. Appendix 2 provides a full list of participants. Appendixes 3 to 8 also include separate statements or contributions made by some group members to clarify their position regarding some or all the report content.

Open Source Software has become ubiquitous (see 2). As several recent reports show, OSS is now playing a significant role in the Software economy in general and is a powerful enabler for ICT as a whole. Therefore a number of OSS specific actions can be proposed to be part of the European Software initiative and could contribute to growth in Europe, jobs creation and improvement of the European Software imbalance.

Although OSS is very successfully disseminating across virtually all businesses and organisations, Market Confidence is not equally high in all areas (see 3.1). If this could be improved, the impact of OSS would be significantly larger. Despite the importance of OSS among European based communities and developers, another issue is the relative fragmentation and lower financial strength of the European OSS actors compared to others, among which the USA. Some important trends are currently taking place in the Open Source Software economy (see 3.2) : Coming from a purely proprietary approach, large traditional vendors increasingly incorporate OSS into their software model, typically starting with nonrevenue relevant components, resulting in a “mixed model” approach for these vendors. New business models choose freely from proprietary, mixed or OSS software models, with a perceived tendency for mixed models to migrate towards higher OSS components. A “mixed” approach is also found among many user organisations also underlined the increase of company funded OSS, the continuous “up-stack” movement of OSS from “infrastructure” to “application” layers, and the significant impact of OSS on “software commoditisation” and “adoption of “de Jure” standards.

We identified several barriers which may limit the economic impact of Open Source Software in Europe (see 3.3). The fragmentation of the OSS space in Europe, some “technical” barriers in relation with IPR, quality and security aspects, the relative weak presence of OSS in education, fairness in procurement, some issues related to deployment and integration, and a number of important IPR, licensing and standards related barriers such as exclusions from standards implementation and unsubstantiated use of IPR threats,

In response to the identified barriers we have proposed a number of practical actions (see 3.5).

Actions having a direct effect on the ICT sector such as ‘European Digital Independence” and promotion of initiatives targeted to commoditize software products of interest to European industries.

Although we do not propose straightforward “mandating” of Open Source we suggest a number of measures related to IPR, interoperability and standards, among which IPR sanity checks, the voluntary Licences of Right regime, protection of OSS implementation of Standards against abusive exercise of IPR, promotion of open source reference implementation of critical standards, the use of open formats for public administration, and recognition of consortia-led standards.

We also considered actions aiming at addressing the OSS space European fragmentation and improving the lack of market confidence such as : the “European OSS forge, promotion of best practises, use of voluntary labels, the European OSS test bed, the support to European Software as a Service platforms based on OSS. The strengthening of OSS organisations in Europe could benefit from tax incentives similar to what some member states have under the concept of Research foundations.

To address the education barrier we propose to include OSS in school curriculum and to promote initiatives such as Computer Driving Licence based on Open Source Software.

Finally, inspired by our knowledge of the key success factors of the Silicon Valley we identified a number of barriers and actions which can impact OSS but also software in general.

Table of Contents

EXECUTIVE SUMMARY

INTRODUCTION .................................................................................................... 7
CONTEXT............................................................................................................. 7
REPORT STRUCTURE ............................................................................................ 7
STATE OF THE EUROPEAN OPEN SOURCE SOFTWARE SECTOR........ 8
OPEN SOURCE SOFTWARE HAS BECOME UBIQUITOUS.......................................... 8
SHORT REMINDER ON OSS .................................................................................. 9
TYPE OF ACTORS IN OSS ..................................................................................... 9
BUSINESS MODELS BASED ON OPEN SOURCE..................................................... 10
EUROPE OSS STRUCTURAL IMBALANCE ............................................................ 11
OSS IS A GLOBAL PHENOMENON ....................................................................... 11
THE ROLE OF OPEN SOURCE SOFTWARE WITHIN THE EUROPEAN
:.......................................................................................... 12
ISSUES ............................................................................................................... 12
Inequality of market confidence ............................................................... 12
European software companies often get acquired by larger US-based companies ................................................................................................................. 12
TRENDS ............................................................................................................. 13
Role of the mixed models.......................................................................... 13
The near future will be diverse................................................................. 13
Company funded OSS support is gaining momentum .............................. 14
OSS users: Combining software models based on requirements ............. 14
Growth of the “Vendor” model................................................................ 15
OSS contributes to Software Commoditisation ....................................... 15
Open source model is moving from “infrastructure” to “applicationlayers 15
OSS accelerates dissemination of de jure standards ............................... 16
OSS contribute too improve the quality and security of software............ 16
BARRIERS .......................................................................................................... 16
Need for OSS European Digital Entrepreneurship .................................. 16
OSS European space fragmentation......................................................... 17
“Technical” barriers................................................................................ 17
OSS is not part of education..................................................................... 18
Not best “capitalisation” of OSS delivered as part of EC R&D projects 18
Fair procurement ..................................................................................... 18
Deployment and integration issues .......................................................... 19
IPR related issues ..................................................................................... 19
Other barriers common for all software proprietary or OSS .................. 21
BENEFITS........................................................................................................... 22
OSS is a growth opportunity for the European ICT sector ...................... 22
Maturity of IT ecosystem .......................................................................... 24
Growth of skilled labour pool .................................................................. 24
Understanding integration costs .............................................................. 25
Standards increase interoperability ......................................................... 25
ACTIONS............................................................................................................ 25
European Digital Independence............................................................... 26
Licensing and IPR .................................................................................... 26
Interoperability and standards................................................................. 27
Procurement policy review....................................................................... 29
Mandating Open Source........................................................................... 30
Promote OSS initiatives targeted to commoditize software products of interest to European industries ................................................................................ 30
Collaboration between communities ........................................................ 30
European OSS “organization” ................................................................ 31
Tax reduction similar to research foundations ........................................ 32
Encourage OSS education........................................................................ 32
Creating a SaaS platform based on OSS.................................................. 33
Other actions common for all software proprietary or OSS .................... 34
APPENDIX 1 GARTNER’S REPORT ON OSS 2008 EXECUTIVE SUMMARY..................................................................................................................... 36
APPENDIX 2 GROUP MEMBERS ..................................................................... 38
ASSOCIATION FOR COMPETITTIVE TECHNOLOGY (ACT)................................... 38
THE COMPUTING TECHNOLOGY INDUSTRY ASSOCIATION (COMPTIA). ............ 39
EUROPEAN COMMITTEE FOR INTEROPERABLE SYSTEMS (ECIS). ...................... 39
EUROPEAN SOFTWARE ASSOCIATION. ............................................................... 39
FREE SOFTWARE FOUNDATION EUROPE. ........................................................... 40
NESSI. .............................................................................................................. 40
OPENFORUM EUROPE. ....................................................................................... 41
SAP................................................................................................................... 41
APPENDIX 3 PROVIDED BY ERWIN TENHUMBERG FROM SAP........... 43
APPENDIX 4 UNDERSTANDING HOW OSS WORKS. PROVIDED BY JUANJO HIERRO FROM TELEFONICA ................................................................ 60
APPENDIX 5 PRINCIPLES FOR THE EUROPEAN SOFTWARE STRATEGY. PROVIDED BY HUGO LUEDERS FROM COMPTIA.................... 63
APPENDIX 6 ASSOCIATION FOR COMPETITIVE TECHNOLOGY (ACT) COMMENTARY TO OSS WG .................................................................................... 65
APPENDIX 7 ECONOMIC FREE SOFTWARE PERSPECTIVES PROVIDED BY GEORG GREVE FROM FSFE ....................................................... 69
APPENDIX 8 POINT OF VIEW OF THE EUROPEAN SOFTWARE ASSOCIATION .............................................................................................................. 80

1. INTRODUCTION

1.1. Context

The need to develop a European Software Strategy was raised by Commissioner Reding in her speech "Towards a European Software Strategy" at the Truffle 100 event (19 November 2007), and reiterated at the Microsoft Innovation Day (4 December 2007). The Commissioner appealed directly to industry on this matter. Subsequently, a number of key organisations in the software sector have sent to Commissioner Reding their views on the issues that should influence such a strategy, and have suggested elements that might form part of a strategy.

This led to a position paper which was presented and debated on January 20th during a meeting with Industry and European Commission representatives.

As a follow-on it was proposed by the Commission to organise seven workgroups, each in charge of refining the position papers views on a particular aspect;

Workgroup n7 was in charge of Open Source Software (OSS) and produced the present report.

1.2. Report structure

Paragraph 2 gives an over view of the present status of OSS (in Europe and outside).

As requested by the commission the main part of the report explores the following aspects : Issues, Trends, Barriers, Benefits and Actions all grouped in paragraph 3 hereafter.

.

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2. STATE OF THE EUROPEAN OPEN SOURCE SOFTWARE SECTOR

2.1. Open Source Software has become ubiquitous

The following are extracts from the press release which followed the UNUMERIT report commissioned by DG Enterprise and Industry issued in 2006 (the term FLOSS (Free/Libre Open Source Software) is equivalent to OSS) :

  1. o FLOSS applications are top rung products in terms of market share in several markets.

  2. o The existing base of quality FLOSS applications with reasonable quality control and distribution would cost firms almost Euro 12 billion to reproduce internally. This code base has been doubling every 18-24 months over the past eight years.

  3. o The notional value of Europe’s investment in FLOSS software today is Euro 22 billion (36 billion in the US) representing 20.5% of total software investment (20% in the US)

  4. o While the US has an edge in large FLOSS related businesses, Europe is the leading region in terms of globally active FLOSS software developers, and leads in terms of global project leaders, followed closely by North America. Asia and Latin America face disadvantages at least partly due to language barriers, but may have an increasing share of developers active in local communities.

  5. o By providing a skills development environment valued by employers and retaining a greater share of value addition locally, FLOSS can encourage the creation of SMEs and jobs.

  6. o Defined broadly, FLOSSrelated services could reach a 32% share of all IT services by 2010, and the FLOSSrelated share of the economy could reach 4% of European GDP by 2010.

The following two studies and Gartner and Forrester clearly show that open source has become ubiquitous:

"Eighty-five percent of companies are already using open-source software, with most of the remaining 15 percent expecting to do so within the next year, according to analysts at Gartner."

See an executive summary of the Gartner report in Appendix 1

http://news.zdnet.co.uk/software/0,1000000121,39554840,00.htm

“Survey shows that Open source components are now ubiquitous. Users are well aware that commercial vendors are massively bringing Open Source into all enterprises, without even asking their customers, changing significantly from a complete commercial build to a mixed orchestration of Open Source and commercially licensed software.”

http://biz.yahoo.com/prnews/081201/ukm003.html?.v=101

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2.2. Short reminder on OSS

Open Source Software (OSS), also known as Free Software, Libre Software, FOSS, or FLOSS, is a software model that was defined by MIT scientist and Mac Arthur grant winner Richard M. Stallman in the mid 80s.1 and then 1998 Open Source Initiative (OSI) started a marketing program for Free Software under the term of Open Source. After maturing in the scientific, university, and individual entrepreneurial environments, OSS has meanwhile established itself in the mainstream of the commercial software industry and has become a commercially and technologically viable alternative or complement to traditional models based on the commercialization of licensees of proprietary products and services in some areas.

2.3. Type of actors in OSS

Although any grouping has an arbitrary element, it is possible to group the actors in this field according to certain criteria, some actors will fit more than one category:

Commercial OSS user

According to Gartner research, 85% of all companies recently surveyed are using OSS, the remaining 15% are planning to do so within the next year. Therefore, all companies are commercial users of OSS. Software development and integration companies are typically among the most active users of software, which is also true for OSS.

Commercial OSS developer

Commercial OSS developers base their revenue stream upon the development of software, either as an on-demand service, or in order to provide secondary means of revenue generation, e.g. see Commercial OSS distributor.

Among OSS developer are also “Hybrid OSS and proprietary” (ex: SAP, IBM, Sun, Novell) and also new actors such as Alfresco, SugarCRM, JasperSoft, Pentaho, Compiere, Talend…. Their products are Open Source but they are the only one to own the copyright. Therefore they can have a dual licensing model (free and not free2).

1

See http://fsfeurope.org/projects/wipo/fser for reference.

2

More precisely the product catalog of mixed model vendors combines proprietary, open and proprietary-built-on-open products; dual licensing (where the licensing rights are held by the company, allowing for the same code to be distributed under several alternative licenses, one of which is proprietary) and open with certified binaries (the source code is available under an open license, but binary code is available exclusively to commercial customers).

Commercial OSS distributor

Commercial OSS distributors build their revenue stream entirely or in part upon the distribution of OSS. The commercial differentiator is typically connected to some additional value offering, which can be in the form of a proprietary add-on or component, or in fitness for purpose, warranties, or other forms.

Commercial OSS integrator

Commercial OSS integrators provide a service that is similar to a commercial OSS distributor, but the service is provided specifically for a certain customer and includes additional development and customisation for the specific needs, as well as consulting and training services.

Non-commercial users, developers, distributors

The OSS ecosystem also includes non-commercial parties, which either derive their revenue from an unrelated third-sector (e.g. scientists) and participate in the OSS ecosystem with their specific knowledge from these areas, either as an activity to support their own professional activity, or as a means of creative past-time activity. There is a considerable exchange between these parties and the commercial part of the ecosystem, resulting in new business approaches and developments.

Of course frontiers between categories are blurry, actors can belong to several depending on their product and can move from category to category.

2.4. Business models based on Open Source

Business models are largely orthogonal to the issue of software or development models. There are more than 300 different combinations3 of the three factors, with new approaches and combinations emerging over time.

Generally speaking OSS vendors cannot tie their revenue models to direct licensing cost, but much of the same effect can be emulated through contractual constructions, trademarks and/or certification. There is a large overlap of business models between OSS and proprietary software, with some business models tied to pure OSS, pure proprietary or mixed model approaches.

http://blogs.the451group.com/opensource/2009/02/23/on-open-source-business-strategies-again/

2.5. Europe OSS structural imbalance

Ideally suited for a model of open innovation and collaboration, OSS has evolved faster in Europe than anywhere else in the world, possibly because its approach is well suited to an environment of diverse participants of varying sizes as it is predominantly found in Europe. But while much of the innovation and development is European in origin, and European experts and contributors are prominent and highly regarded in the OS community worldwide, Europe has yet to bring forth an Open Source champion of comparable size to those operating out of the US.

Reasons for this structural imbalance can at least in part be found in the transformative process that several of the large US IT companies have entered in the late 90s when they began to develop their own OSS strategy. This development brought about very large mixed-model companies that often become visible as champions of OSS, most of which are based in the US.

In addition, most OSS consortia – the non-profit organisations managing OSS development and marketing – appear to be based in the United States and funded by US IT companies. At a second glance, it becomes apparent that a strong European ecosystem of organisations exists, but a lack of strategic focus on these organisations by European players is causing an imbalance of mind-share in favour of the US.

Europe must address this imbalance.

In order to maximise the benefits from OSS in Europe for European developers, users and entrepreneurs, our strategic focus needs to be on the better exploitation of OSS in Europe, the strengthening of the European ecosystem around OSS, and capacity building initiatives.

A pragmatic approach, taking into account legal constraints and market reality is key to Europe’s competitiveness.

2.6. OSS is a global phenomenon

The dynamics and OSS ecosystem are global in structure, with commercial success reaped on all levels: local, regional, national, and international. Smaller companies provide employment, competency and taxable revenue for European countries even if projects like Linux, Eclipse and OpenOffice.org thrive mainly based on the code contributions financed primarily by larger US-based vendors.

In some cases, e.g. OpenOffice.org with the primary development based in Hamburg, Germany, that financing contributes directly to European GDP.

The high level of interconnectivity is a primary strength and benefit of OSS, and should be taken into account in all policy setting activities. The focus should be on the creation and support of local champions that will have a global impact.

3. THE ROLE OF OPEN SOURCE SOFTWARE WITHIN THE EUROPEAN SOFTWARE STRATEGY :

3.1. Issues

3.1.1. Inequality of market confidence

Market confidence is not equally high in all sectors due to lack of information and misinformation about availability of support, skill levels, understanding of licence terms, and liability. OSS allows users to approach integration by means of the vendor of the software, a third-party integrator, or their in-house IT department. Wrong choice of integration path can lead to higher cost, which is often falsely attributed to the OSS software model, resulting in misconceptions.

3.1.2. European software companies often get acquired by larger US-based companies

Despite the difficulties that European software start-ups might have, there are indeed European software vendors including open source software vendors with the power to acquire other software vendors (in the US, Europe or elsewhere). However, the acquisitions of European software companies like StarDivision, NetBeans, MySQL AB, Innotek (VirtualBox) and SuSE by US-based vendors show that successful European software vendors often get acquired by US-based companies. Partly due to historic reasons, there are far more US-based IT companies with a large buying power than there are European IT companies who can afford to acquire other software vendors, which leads to the effect outlined in 2.3 above. European IT companies also have fewer alternative growth strategies than their US counterparts due to smaller/more risk adverse venture capital community and fewer IPO opportunities. This is not an issue per se, but if the lack of Europe-based software companies is seen as an issue, it is important to understand the dynamics of the market.

On should question what are the consequences of this trend. It could impair the so called “Europe Digital Independence” and also impact jobs.

Moreover, there may be situation where a particular piece of software plays a key role in some economic activity or may create security related concerns under certain circumstances. In such situation, promoting open source alternate solutions may be used to modify the situation of actors and shift the competition “playground”.

Regarding jobs we believe that ultimately what matters is where are jobs located. If European Software or OSS companies are acquired by non European firms but if the corresponding jobs stay in Europe (and if the threat on “Europe Digital Independence” is minimal) then the consequences on Europe are limited. Conversely we know that European Software companies can, just as well, while having their HQ in Europe, decide to grow or move R&D facilities to non European countries.

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3.2. Trends

3.2.1. Role of the mixed models

Some companies combine Open Source with proprietary models to optimize development cost on the one hand and maximise differentiation on the other hand. Some vendors use closed source elements to differentiate themselves from other Open Source vendors based on the same software ("value adding"). Vendors based on a proprietary software model use Open Source in order to improve standards support and to share development cost, in particular on non-differentiating components.

3.2.2. The near future will be diverse

Open Source Software represents a software model defined by a high level of user control over the software in combination with often unequalled freedoms to study and innovate upon the software, allowing for rapid incremental innovation. These benefits have become so associated with the software model that OSS is often misunderstood as a new development or business model.

There is a wide variety of development and business models built upon OSS, ranging from traditional approaches, such as custom development or COTS to service based approaches and SAAS. Most of the large players have incorporated OSS into their strategy, resulting in a mixed model approach (see

3.2.1 above). Considering that almost none of these companies had significant OSS offerings only 10 years ago, it is possible to observe a clear trend towards OSS.

At the current point in time it is impossible to predict when and if that trend will further expand or come to an end. New companies enter the market with models spanning the entire range of proprietary models over mixed models to OSS models. Only time will show which models will be most successful in Europe.

Additionally, as the Information Economy Report 2007-2008 of the United Nations Conference on Trade and Development (UNCTAD) highlights, the ICT sector itself is a remarkable source of innovation and economic growth, but there is strong evidence that ICT-enabled innovation in other sectors has an even larger impact on the overall economic situation.

Key factors identified by UNCTAD as part of this process are the commoditisation of software, along with open innovation approaches, based on OSS. While OSS itself has remarkable innovation benefits, it appears necessary to include ICT-enabled sectors into the assessment to understand OSS's full potential for European innovation and economic growth.

One usually look at OSS models in the pure Software space. But this is changing. In addition to software related business, more and more companies offer products and services which are not software but rely on software and on Open Source Software in particular. Google is probably the most visible example. Software is not its primary source of revenue, but Google both uses OSS produced by others and releases its software as Open Source.

3.2.3. Company funded OSS support is gaining momentum

Having evolved from it’s original academia origin to a viable option for research and development, OSS has attracted more and more companies to fund and drive communities. The drivers for this are multiple (establish standards, share maintenance costs, gain visibility). This will definitely accelerate, primarily in the area of building eco systems, as we see in initiatives as e.g. Eclipse, Android, OW2, Limo

As existing projects demonstrate real returns on investment, companies will allocate more of their research and development spending in open source communities.

In addition, the "support for profitable business models" and "the prevention of vendor lock-in/the promotion of competitive choices” are also key drivers for why companies are funding and driving OSS communities.

3.2.4. OSS users: Combining software models based on requirements

Users of OSS include companies, administrations, public institutions, schools and universities, SOHO enterprises, end users. Depending upon factors such as availability of OSS solutions, the individual capabilities of the software and needs of the users, and pre-existing infrastructures, solutions often integrate both proprietary and OSS components.

It should be added, that the trend today is that OSS solutions get used in number of companies without the upper management being aware of this shift in the companies' “procurement strategy”.

ECIS adds the following :

This is due to engineers which manage the companies' IT systems just download, test and - if it works - install different OSS solutions to complement the already installed IT base. This is possible due to the free access to the OSS without having to go through cumbersome and time consuming tendering processes. MySQL is an example of such a trend.

End of ECIS addition.

3.2.5. Growth of the “Vendor” model

Inspired by Red Hat, the OSS the “Vendor” model is being adopted by numerous companies in all domains (BI, ETL, CRM, ECM, ERP,…) .

3.2.6. OSS contributes to Software Commoditisation

Commoditisation trend : generic software follows an evolutionary trend toward commoditisation (due to intense competition that level functionalities and added value) and open source is generally a key factor of this evolution. Even domains with very hard constraints such as telecommunication systems or embedded systems requiring expertise and know-how is now subject to this commoditisation.

Commoditisation benefits users and integrators and challenges pure software vendors to innovate rapidly in order to differentiate their products from commodity versions: the opposition of these types of actors on the OSS subject is understandable.

Examples of sectors in which OSS is competitive:

  1. o OS with Linux, Android, Symbian,

    1. o databases with MySQL and PostgreSQL,

    2. o office suites and desktop tools with Openoffice or Mozilla
  2. o Internet tools such as servers, browsers, editors, Content Management Suites, blog and wiki engines, ….

  3. o languages and IDE.

3.2.7. Open source model is moving from “infrastructure” to “application” layers

Mixed models are understood as combination of Open Source and proprietary software under a proprietary umbrella.

Open Source Software is however seen as making strong inroads in terms of customer adoption in areas previously thought as strongholds of proprietary software: business intelligence, high performance relational databases, ETL (ex: Talent), ECM (ex: Al Fresco), etc.

This movement “up the stack” is expected to continue in the future

3.2.8. OSS accelerates dissemination of de jure standards

Open source is a way to promote standards either de facto or de jure. A lot of de facto standards disseminated through open source implementation (early IETF standards, W3C, …). Open source implementation can be a way to accelerate discussion and dissemination of de jure standards. An open source implementation can help consolidate a standard by pointing the inconsistencies or lack of precisions of some specifications (it’s especially true for interoperability standards).

3.2.9. OSS contribute too improve the quality and security of software

Distribution of the source code of a piece of software and the right to improve and republish it, contribute to it incremental improvement ; when a large community of contributors is motivated and well organized, the resulting code may be considered the state of the art with respect to some functionality, the quality and dependability of the software, its intrinsic security. For some specific functions such as cryptography and e-voting algorithm, access to the source may be mandatory.

3.3. Barriers

3.3.1. Need for OSS European Digital Entrepreneurship

The very first step to capture the current Open Source trends is to have a coherent strategy and also a global vision. At the moment this is not always the case. Most of the proprietary software vendors do have a strategy, a roadmap and a vision (functional and technical).

Open source is often perceived mainly as an alternative to proprietary software. Hence the vision is reduced to an implementation roadmap, trying to compete with closed source software in terms of features to implement. One should think of OSS as a global phenomena to define a strategy in terms of impact and role of OSS in the service economy. Instead of being perceived as “running after a proprietary solution” or as an alternative, Europe should try to lead and to push an innovative technical vision implemented in Open Source. As this implementation will be in Open Source, all IT players, promoting or not, using or not using Open Source, will then be able to use it as they want, without any business discrimination.

The Commission is not the owner of this vision. The various actors, creators, integrators, users, are. For it to grow it requires what we could call an “Open Source Digital Entrepreneurship” attitude, meaning that the various communities and actors could maybe better share a common roadmap of who does what for which goal in the three aspects (creators, integrators, users).

3.3.2. OSS European space fragmentation

Note: the following applies to European OSS communities not OSS vendors

The Open Source software communities do not have the critical mass and are not enough organized to cooperate and share issues, infrastructure, etc… In Europe there are a number of different Open Source communities or consortium. They all suffer the same issues: Lack of money, lack of reliable infrastructure, lack of European visibility, fragmentation of OSS foundations between countries.

Furthermore relationships between Communities and enterprises and among Communities are not always effective yet. In that respect the US show a better example. There is an understanding by US entities that supporting such entities is useful “ecosystem maintenance” for their commercial environment. Europe has a very healthy ecosystem of organisations, some of which are larger than their US counterparts, but there tends to be very little strategic understanding in European players that a focus on collaboration with these players would initiate a positive feedback cycle for the European area.

3.3.3. “Technical” barriers

Awareness and knowledge (of legal aspects) about open source software leaves much to wish for. Successful companies utilising open source in their business models have the knowledge of how to incorporate open source, and its legal obligations, in their proprietary software and services. Unless awareness of the included open source software and the effects thereof are known, a company would either be reluctant in using open source software or simply use it without any governance.

As the awareness and knowledge of open source software grows, the understanding of how to monetize open source will also evolve, with new business models and opportunities for companies.

Quality and security barriers :

In theory, the source code itself can be inspected for quality assessment and even processed by code analysis tools: this may requires specific skills and man power that may not be available in the organisation planning to use the software. Big companies may perform this kind of evaluation as part of their sourcing process. Open Source has a reputation for security and quality. Scientific studies show that software using an open development methodology has fewer defects than software following closed approaches. How can we quantify that perceived advantage, how can we measure the quality of OSS? If we take the point of view of the NESSI and Industry, quality is:

  • Intrinsic quality of the software itself : functional and non functional characteristics, soundness of the architectural and implementation choices, value of metrics on quality and complexity…..

  • Technical support and maintenance. Integrating or using Open Source in a critical environment, or application, comes with specific constrains such as the ability to react when a technical problem happens into the component. Who can bring the needed support? How the maintenance can be done?

  • Security. Let’s take the security as a whole without trying to come with a specific definition. When proprietary software is used, we need to trust what the editor will say. The security assessment of Open Source Components, need to be performed by independent third parties or the user themselves.

The above “Technical” barriers are already covered by those OSS vendors who have legal compliance guarantees and IPR risk management and protection as part of their offering, and sometimes as part of a global packaged service including certification, indemnification, support and service.

3.3.4. OSS is not part of education

Regarding the research and education, in Europe there is no real official programs where Open Source is specifically mentioned. The Open Source could be included in some technical, lawyer and business schools curricula.

There is a need to encourage greater use of OSS software in education in general and support OSS curricula definition to prepare students to support OSS engineering growth in IT industry and research.

3.3.5. Not best “capitalisation” of OSS delivered as part of EC R&D projects

From a funding point of view, the Commission already funded a large number of projects. What to do when the projects stop? What will be sustainability of all the productions (documents, and software)?

Is there a way to federate what was already achieve in order not to reinvent the wheel in each project?

3.3.6. Fair procurement

Experience suggests that lack of interoperability consumes around 30-40% of IT budgets in both the private and public sector (this is not limited to OSS but applies to software in general). Since procurement calculation generally does not account for “decommissioning” or “exit” costs from a particular solution, a procurement decision for a specific solution often establishes a strong bias in favour of the vendor of the first solution for all consecutive tenders. This violates European legislation which mandates vendor neutrality based on transparency and non-discrimination.4

A recent study5 of Open Forum Europe (OFE), which scanned 136 tenders for trademarked names concluded that 25% of these tenders were specifically requesting trademarked products, violating the principle of vendor neutrality.

Experience suggests that many such cases remain undetected due to lack of translations, which themselves constitute a violation of EU procurement rules.

3.3.7. Deployment and integration issues

Deployment and integration of Open Source Software is nowadays provided by most established integrators. It is therefore possible to deploy OSS in very much the same way as software based any other software model. In this way, deployment and integration of OSS faces very much the same issues, in particular problems during the integration phase. These issues are caused by a variety of component specific factors, e.g. lack of professional roadmap, lack of a global approach, lack of modularity and interconnectivity. In order to increase efficiency and ease of integration, these factors should be addressed.

3.3.8. IPR related issues

ACT disagrees with the content of paragraph 3.3.8 and argues that RAND standards are functionally compatible with open source, even if they cannot be implemented in GPL code.

We invite the WG 3 to consult the WG 7 as a valuable source of input but hold our own informed views on IPR issues.

Exclusion from standards implementation (SAP and CompTIA did not agree to this point on Exclusion from standards implementation) : The procurement issue is aggravated by discrimination against OSS in the licensing conditions for some IT standards. Over the past years it has become clear that specific patent licensing schemes, most importantly the so-called “RAND” 6 terms, discriminate against OSS implementation. This issue complicated the recent antitrust cases in

4

http://www.osor.eu/news/hidden-cost-of-proprietary-standards-may-lead-to-illegal-tenders

http://www.osor.eu/news/it-open-source-group-protests-proprietary-software-deals

5

Seehttp://osacademy.hosting.amaze.nl:8060/repository/media- centre/articles/procurement/ofe_procurement_monitoring_report.pdf

6

RAND: ‘Reasonable And Non-Discriminatory’

Europe and was y “a patent embodied fully or partly in a Recommendation | Deliverable must be accessible to everybody without undue constraints."

Examples of such exclusions can be found in various areas. One of these areas are the MPEG standards in multimedia, where innovation has been dramatically reduced before the recent development of the Dirac codec by the BBC as OSS provided a high-quality modern alternative that is not patent encumbered.7

Unsubstantiated use of IPR threats . It is important that effective measures are implemented to protect the interests of both open source and proprietary software both as a software development and as a business model. Governments should ensure a level playing field for both software development models.

While we recognise the legitimate rights of intellectual property rights owners, we regret recent incidents of patent holders abuse and unsubstantiated use of their rights against open source/free software developers.

A recent development, which deserves the careful attention from the Commission, is the use of unsubstantiated threats of intellectual property rights infringements against those who attempt to develop interoperable software products. As an example, a major software company has publicly stated that it believes Linux and other open source software infringes 235 of its patents, but has never identified any of these patents.

Vague claims by patent holders that open source software may infringe their patent rights should be obliged to identify supposedly infringed patents or cease to make unsubstantiated allegations. This would prevent patents from being invoked to spread fear, uncertainty and doubt (“FUD”) against open source software products in the minds of both developers and users. The behaviour of creating FUD against open source software solutions should not be tolerated, as it amounts to an anticompetitive strategy aimed at distorting conditions in the marketplace to the detriment of OSS products.

Mandates for OSS can harm OSS :

The following is a view specific to SAP and CompTIA

Open source has created an interesting opportunity for entrepreneurs as they can start a business on top of something that is already available. For example, many companies offer services and support around popular open source software packages.

Due to the mixed model growth, software vendors are combining open source with closed source, and as a consequence, the line between open source and closed source increasingly blurs. Therefore, any preferences or mandates favouring open source may be harmful for all software vendors including most open source vendors.

http://www.bbc.co.uk/opensource/projects/dirac/

For example, if an open source vendor monetizes its open source contributions by selling closed source add-on components and closed source enterprise editions, such a vendor will be discriminated or excluded during such public tenders. This is particularly true when the closed source “enterprise editions” have been productized under a different brand name and thus are not recognized as an open source product anymore. Thus, even though it might sound paradoxal, preferences or mandates for open source may harm open source, because they reduce the opportunities for the contributing open source vendors to get a return on their open source contributions. Therefore, open source preferences or mandates could be counter productive in growing the European software industry.

end of the SAP and CompTIA specific view.

3.3.9. Other barriers common for all software proprietary or OSS

This paragraph is based on a closer look at the Silicon Valley dynamics provided by some group members

The European market is still fragmented compared to the US market

It is often easier for software start-ups to succeed and grow in the US than in Europe. One of the reasons is the fact that the US offers a very coherent and homogeneous market whereas Europe is still very fragmented due to language, legislation and cultural issues. The introduction of the Euro as a common currency has definitely helped a lot, but compared to the US it is still more difficult for new software vendors to grow in Europe. Typically software companies with similar ideas grow much faster in the US than they do in Europe.

The success of the various social networking platforms might be an indicator considering that LinkedIn and Facebook are well known internationally whereas the XING platform founded in Germany seems to be known far less outside of Germany.

The Silicon Valley provides excellent networking opportunities

The Silicon Valley in California has become the place to be when it comes to networking and partnering in the IT industry. Most IT companies have an office in the Silicon Valley and therefore it is easy to connect with potential business partners. Europe does not have a similar “networking hub” and it is probably difficult to create one from scratch artificially.

Starting a new company seems to be easier in the US

In the US there seems to be a strong culture of entrepreneurship, and thus more people try to start their own business at some point in their life. In addition, the required processes for starting a new business seem to be more streamlined and automated in the US than they are in many places in Europe. Yet, we have that many markets in Europe, including Denmark and Sweden are even better positioned than the US for innovation-based entrepreneurship. In fact, according to a study by the Information Technology and Innovation Foundation in Washington, there are some very promising trends for entrepreneurship in Europe. http://www.itif.org/index.php?id=226

Most venture capital firms are located in the US

Software start-ups often need external capital in order to grow. However, most venture capital firms are located in the US and thus also understand the US market much better than the European market. Therefore, US-based start-ups often find it easier to find investors than European software companies.

The US seems to be more attractive to immigrants from India, etc

Most larger software companies have development and support organizations in places like Russia, India and China. Apparently more people with IT skills from Russia, India and China are immigrating to the US than they are immigrating to Europe. As a consequence stronger ties seem to develop between these countries and the US than between Europe and these countries, which potentially gives US-based software vendors an advantage over Europe-based software vendors.

3.4. Benefits
3.4.1. OSS is a growth opportunity for the European ICT sector

There are substantial strategic, political and economic reasons for Europe to embrace and promote Open Source. These reasons include the development of a full-blown ICT industry. Lifting the barriers above will help Europe maximize its competitiveness arguments while developing a sustainable ICT sector.

The absence of the barriers mentioned above will also help the ICT sector gain an edge in key areas and create credible industry players as an alternative to the ones existing on the market today.

Software innovation can foster economic growth in Europe - New innovation in the software sector, including in the area of open source software, has the potential to contribute significantly to Europe's economic growth and job creation.

Innovation in the software sector can flourish, creating jobs, new start-up companies and underpinning economic growth in Europe if the right policies to promote ICT investment, skills development and competition will be put in place. As a natural consequence of market forces Open standards and open source software do and increasingly will play an instrumental role in facilitating the development of new products and arrival of new entrants into the marketplace.

Service economy is now a tendency for IT in general. Open Source fits very well in this paradigm and it has much to offer and contribute in software as a service domain. One concern, however, is that service-based ICT businesses are more vulnerable to the forces of globalization and competition from BRIC countries.

Global economical crisis represents an opportunity for Open Source, since it helps to reduce costs

Innovation and economic As demonstrated also in the UNCTAD Information Economy Report 2007-2008, OSS is an innovation enabler in the ICT sector, and even more so in the even larger ICT-enabled sector. As such, OSS provides opportunity for economic development which specifically countries in transition are getting ready to harness for their development to leapfrog their economic development based.

Not entirely unlike countries in transition. the European economy is based upon Small and Medium Enterprises (SME), which are key to innovation and employment. For this sector, OSS translates into ubiquity of cost-effective software that combines a high level of control for the company with rapid innovation and the ability to innovate in all parts of the value chain.

The software model of OSS is characterised by a high level of user control over the software in combination with freedoms to study and innovate upon the software, allowing for rapid incremental innovation.

These benefits can be particularly relevant to the public sector, which often has specific needs of sovereignty over its own infrastructure and strict auditing requirements for security and confidentiality reasons.

These strategic benefits are essential, and unique to OSS.

ACT disagrees with the above sentence and has provided the following

On the other hand, Europe has to be wary not to fund OSS loosely under schemes that would continue to result or even increase the problem of third countries being the ultimate beneficiaries.

For a broad range of innovations resulting from labour-intensive and costly research and development, proprietary or mixed models are and will continue to be more akin to contribute to Europe’s competitiveness.

On the demand side, both private and public bodies in a majority of instances select commercial or mixed solutions, because they represent the best value-for-money proposition in response to their needs.

Public policy should avoid interfering with, and on the contrary encourage competition and choice among, all various market-based approaches and solutions.

End of ACT’s view

Examples for OSS deployment on these grounds can be found in various public bodies in EU member states, e.g. Germany, where the agency for IT security (BSI) has been recommending OSS on these grounds for several years and worked on projects to address specific needs. Deployment has taken place not only in the BSI, but also the foreign ministry and is ongoing in the city of Munich. Another relevant source of reference is the UK's “Open Source, Open Standards and Re–Use” Government Action Plan:

http://www.cabinetoffice.gov.uk/newsroom/news_releases/2009/090224_openso urce.aspx

3.4.2. Maturity of IT ecosystem

Growing maturity of the IT ecosystem can be observed in the form of commoditisation of software and a growing relevance of interconnectivity as demonstrated by the discussions around interoperability and Open Standards. As observed in other industries (e.g. car manufacturers), these trends will inevitably lead to an increased reuse and recombination factor, where only differentiating components are produced in-house while generic components are being reused or co-developed.

A well-developed OSS ecosystem is an ideal breeding ground for such an economy. The increasingly well-developed legal infrastructure around OSS, also thanks to initiatives such as the European Public License (EUPL), provides a solid and reliable foundation for public and commercial activity with clearly established ground rules that fall into no more than three basic categories.

While these trends and their impact seem largely inevitable, Europe is in the uniquely favourable position of already having a healthy OSS ecosystem in place that it can build upon.

3.4.3. Growth of skilled labour pool

Whereas proprietary software education is necessarily restricted to schooling in the use of the particular product but is generally supported by education of programming languages and other basic IT skills, OSS allows deeper analysis, facilitating both traditionally education and autodidactic training. The strategic use of OSS for education in some EU member states8 is beginning to show first results, and provides good examples for increased social cohesion and equality of chances facilitated through OSS.

i.e. Spain

3.4.4. Understanding integration costs

More and more readily available economic analysis of the integration cost can help to avoid unforeseen complications and cost on the user side, while increasing demand for professional integration services for OSS, fostering growth of the commercial adoption in Europe.

3.4.5. Standards increase interoperability

Fortunately, the increasing standardization in the IT world creates a level playing field for all vendors. A good definition of standards and interoperability can be found in the following EICTA white paper:

http://www.eicta.org/index.php?id=242&id_article=81

As the IPR modes chosen at W3C and OASIS show, transparent and inclusive participation rules most times already lead to royalty free IPR modes:

OASIS IPR Mode Number of OASIS TC’s
Royalty-Free on Limited Terms Mode 57
Royalty-Free on RAND Terms Mode 13
RAND Mode 0

The more parties (including competitors and users) participate in a standardization effort, the more the different players push for royalty free terms because nobody wants to be put into a disadvantageous position. Therefore, open participation and transparent development processes are a base recommendation for standardization.

Since the reality shows that the large majority of technology standards is being defined under royalty free terms anyway (due to the negotiations of the involved parties) there is no need for regulatory intervention.

3.5. Actions

Foreword

The current market is already highly regulated through intellectual property laws. It is therefore important that the European Union is mindful of such regulation when considering further regulative steps. An over-regulated market tends to bring inefficiency, and there are indicators that the current market may already be over-regulated.

Any regulative action would therefore require appropriate change management to give established players sufficient time to adapt and grow. At the same time, European competitiveness depends upon reduced barriers to entry into the market in combination with specific support and incentives for new, innovative players.

3.5.1. European Digital Independence

Although this will be potentially very rare, there may be sectors where a key software plays an essential role in the European economy or security up to the point where authorities could consider that they need an alternative. Actions could be such as calling for the development of European OSS alternatives for some critical software functions.

As an example let’s assume that PKI software products (Public Key Infrastructure) are all produced by non European companies (this is not the case as of today). PKI plays a key role in securing Web based transactions. Europe may consider that encouraging the creation of a European based OSS PKI solution would be safe measure to guarantee that Public bodies and Companies, if they wish, can have access to a Europe based solution.

3.5.2. Licensing and IPR

Lack of knowledge on OSS licensing still permeates parts of industry, creating barriers to adoption due to perceived insecurities.

The European Commission should support the building of knowledge in this area, and in particular provide European public institutions with information about the EUPL and/or CeCILL family of licences, which were written with the specific needs of European public institutions in mind.

Statements by the European Commission regarding the validity of these licences could also prove helpful to build confidence. Increased transparency of which licenses are most appropriate for certain contexts could be a useful measure to overcome lack of confidence – the Creative Commons approach whereby copyright (or “copyleft” licenses) are prepared for use following exhaustive legal analysis is an interesting example of what could be aspired to with open source licensing agreements.

IPR sanity checks

Setting a clear agenda on IPR sanity checks and the ability to deliver legally binding IPR compliance statements on OSS components by a transparent body is a much needed action item.

SAP disagrees with the following part of this proposition

On top of providing Compliance statements this body could have the following goals from which Open Source will strongly benefit

-push for ex-ante disclosure on patents

-call for transparency of the judiciary in charge of software IPR rulings

-
promote acknowledgement and full integration of alternative IPR modes aside the RAND types by Standards Development Organisation, research projects, public procurement, and public/private European entities delivering IPR-related assets.

-
promote alignment of e-procurement processes to ensure the risk of vendor lock-in is evaluated and part of the decision criteria.

-
push for Systematic “prior art” research on open source projects as a step of new patent analysis

Voluntary Licences of Right regime