A Strategic Analysis of Competition between Open Source and Proprietary Software Applications

June 2007 | Sen, Ravi

This paper analyses a software market consisting of a freely available open source software (i.e. OSS), the commercial version of this OSS (i.e. OSS-SS), and the competing commercial proprietary-software (i.e. PS). We find that in software markets characterized by low direct network benefits, the PS vendor is better off in the presence of competition from OSS-SS. Furthermore, the OSS-SS vendor in these markets is better off by having lower usability than PS. Therefore, the OSS-SS vendor has little incentive to improve the usability of their software in these markets. On the other hand, in software markets characterized by high network benefits, a PS vendor is threatened by the presence of OSS-SS and can survive only if the PS is more usable than the competing OSS-SS.

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Journal of Management Information Systems