Move over, TCO

Frederick Noronha

The total cost of ownership argument doesn’t make much sense in a diverse world where it hardly takes the same amount of time to earn a dollar. “The price of a typical, basic proprietary tool set required for any ICT infrastructure, Windows XP together with Office XP, is $560 in the US. This is over 2.5 months of GDP/capita in South Africa and over 16 months of GDP/capita in Vietnam,” says a study by a young Indian expat based in the Netherlands. India price levels are not far away from Vietnam.

India throws up some strange figures. With a GDP (per capita) of $462 per year, it has an estimated 6,031,000 PCs, and a piracy level of 70 percent. It would take 14.5 months for an average Indian to earn enough to buy the proprietary software needed to run his PC—at international market rates.

Says Aiyer Ghosh: “Inexpensive skills development is an important reason for developing countries to promote free/libre open source software (FLOSS). But, in contrast to the situation in richer countries, another reason is simply cost. Total cost of ownership (TCO) studies show varying results in rich countries, where labour costs are high and the relative low license fees of open source software need not necessarily reduce total costs of using and maintaining systems. When labour costs are high, labour-intensive components of the total cost (such as support, customisation, and integration—i.e. everything other than the software licence fee, communication and hardware costs) represent a high share of the total cost, making the licence fee itself (which is not present in the case of open source software) less crucial. In contrast, when labour costs are low, the share of the licence fee in the total cost of ownership is much more significant, even prohibitively so.”

Aiyer Ghosh recently prepared a table comparing the $560 cost of a single Windows + MS Office licence to GDP/capita for 176 countries and some geographical aggregates. In India, GDP/capita is $462, so the licence cost of Windows is 14.5 months of average income, and translated into US terms that’s $42,725! Says he: “Not surprisingly, the higher this effective cost, the higher the BSA-estimated piracy rate.” See his study at http://firstmonday.org/issues/ issue8_12/ghosh/index.html

Aiyer Ghosh is currently

programme leader, FLOSS, at MERIT/INFOnomics, University of Maastricht at the Netherlands. His current work is going further in-depth into the skills development aspects of FLOSS, as well as interoperability and open standards and the policy issues relating to free software and government.

In his late twenties, Aiyer was last in the news for being one of the key persons behind a major research project coming out of Europe, that took a detailed look at the reasons behind the growing use of free and open source software. Aiyer Ghosh moved from New Delhi to Europe a couple of years ago. In Delhi he was closely involved in the Indian Internet/telecom scene. He wrote for technical and mainstream publications too.

Ghosh had his own newsletter, ‘Indian Techonomist’, which went out to people like Reed Hundt and Vint Cerf, and he wrote various consultation papers on the opening up of the Internet policy (especially to small providers) at the request of senior Indian government officials.

Here are some extracts from an exclusive conversation Aiyer Ghosh <rishab@dxm.org> had with Frederick Noronha:

What do you consider as the main findings of your study?

Well, the paper doesn’t really provide anything new for anyone who’s taken a short time to think about this—GDP per capita figures are well known, after all. The main finding was from the earlier FLOSS survey of developers (and user organisations) that showed FLOSS participation is an informal, but effective and valuable part of skills development.

The second part of the paper puts together licence fees and average income to show that the entire TCO argument is moot in the context of developing countries—with low labour costs and low income levels, not only are licence fees a major part of the total cost of ownership, they can make software unaffordable. Put together with the skills development benefits to society at large, the case in favour of FLOSS in developing countries seems quite clear.

How new is this argument?

The skills development part is new in the sense that there has been little empirical or analytical work in this area previously. An empirical study to quantify the impact of skills learnt by developers through FLOSS participation, and to quantify the value of these skills to employers, is part of a new research project I’m doing.

But one can already derive some conclusions from existing data—that FLOSS acts as a sort of subsidy or technology transfer from those who pay for skills training to those who do not (or cannot).

In the European context, this could benefit SMEs; in the global context, participation in FLOSS development represents a technology transfer from richer countries (that spend more on formal training) to developing countries with fewer resources to pay for formal training.

The concept of comparing income to costs is not new, but this is the first time you have a comprehensive table showing precisely the effective cost of licensing compared to average income. Since this table shows the number of months it would take to earn enough to afford a single copy of the software, and the equivalent US dollar price if someone in the US were to spend as many months’ income, it has a high impact on readers.

Most people—policy makers and business leaders—talk about the importance and benefits of ICT in developing countries. But they tend to implicitly support a policy of providing these benefits only to the wealthiest, who happen to be the top 5 percent or less of the population.

Proprietary software and the high licence costs that come with it can be a basis for ICT-based economic development only for this elite, rich class of society that can afford to invest in it. Since this elitism is rarely explicit, and usually overlaid with a rhetoric that emphasises the widespread access to ICT—using terms like ‘leap-frogging’, ‘bridging the Digital Divide’, etc—the table of costs makes it quite clear that if policy makers want to talk about widespread access, they have to put their money where their collective mouth is. They need to look at solutions that are actually widely affordable. Not those that will benefit only a select few.

What made you work in this direction?

I have been giving a series of talks on ICT and development, and free software in particular. I found the continuous repetition of the TCO argument (look at the total costs, Linux isn’t really free) extremely irritating. More so, since in the context of developing countries this argument is turned on its head. I have made presentations over the past year with cost tables for a handful of countries, so I thought it would be useful to make a comprehensive table for all of them.

How has the study been received?

When I give presentations on this, it tends to have a high impact. People react with a surprised recognition of the facts that they probably already really knew, without realising the significance. The publication of this paper has been covered quite widely in the (European) press.

Your study seems to come in two parts—costs in the Third World, and motives of FLOSS programmers. How do you think these two (seemingly diverse) aspects fit in?

Costs are the big issue, but there has always been a justified reluctance in developing countries to be wary of technology cast-offs from the rich world, portrayed as the poor man’s ‘affordable’ version of the latest technology. So the cost argument on its own, though very striking, is not enough.

It is important to recognise that free software is the latest technology in many sectors, and indeed the reason for its adoption in Europe is rarely primarily the cost, but more often a perception of improved security, better control and customisation possibilities.

For developing countries, these technical quality issues are important, but there is extensive literature related to the use of FLOSS in Europe or the US that applies equally to them. However, the skills development argument is an additional benefit of FLOSS that is particularly important to developing countries, as it is the route through which ICTs can spread wider into society—when that society cannot afford to formally train everyone.