OSS/FS Vs Proprietary software. Are they perfect substitutes?

Would you agree that OSS/FS and proprietary software are perfect substitutes? Why or why not?

Can you define "perfect substitutes"?

When I mention "perfect substitute" what I mean is that OSS can be used in exactly the same way as the proprietary software, and that the user of the products will derive exactly the same utility from OSS as from the proprietary software. Therefore one would simply switch to OSS without thinking twice because both can perform exactly the same functions, yet OSS is cheaper. In order words are there any advantages or disadvantages of using OSS over proprietary software?

I do not think they are all perfect substitutes. For exemple, I used open office but I found it much less convenient that Microsoft office, even for a non-professional use.
But a software like Mozilla Firefox is more convenient and efficient than i.e. in my opinion.
It depends totally on the kind of software used and the degree of innovation and R&D used for the development of proprietary software.

I think the OSS/FS come very close to the proprietary software. There is just a barrier in the users minds that a OSS/FS cannot be as useful as a software which they have to buy for quite a lot money. But if you once get used to the user interface of OpenOffice, you would soon recognize that this OSS includes all of the features 90 percent of the private userers need for their work with a word processing program.

I think if they were perfect substitutes, everybody would go for the free OSS/FS! I think there are some differences in features, compatibility and ease to use that explain that OSS haven't penetrated the market very well.
Even if it is stated in the case that customers don't decide regarding the price, the features and the compatibility BUT the cost of transition, i don't really agree with this statement.

I agree with Edith. As a translator, I was contacted by many different companies selling their translation software. However, in this sector, there is one software, number one for so many years, and no matter what they do, every translator and client I know refers to it. It may be compatible, cheaper... that's no use ! It is unmatched... the interface, the way to use it makes it absolutely necessary.

That is the reason why I would like to see a definition of "perfect substitute." There is almost impossible to say two pieces of software are perfect substitutes (even for the identical software), given different usage situations. Probably it will be more meaningful to discuss under what conditions OSS and PS would be substitutes.

According to the paper, some believe lower price, similar functionality and file compatibility are decisive factors. However, for business cunsumers, they believe the cost of transition, such as projduct knowledge, training, etc. may outweigh other factors. In addition, the users' base might also be an important factor.

The research results also indicate that the significant impact of perceived usefulness of software on the WTP. Maybe to keep extending the product features make the best an open software a better substitute.

To answer to Professor Huang, under what conditions OSS and PS would be substitutes?
I think that when the OSS is a perfect substitute for the propietary software, network effect enables the firm to price the proprietary software so low that it may drive the OSS out of market. It is then natural to ask whether the market structure will change when the OSS may provide higher value to users than the proprietary software.
However, the market may tip to OSS only if it provides significant benefits to users like customization.

I also think that when OSS is a perfect substitute for proprietary software, networks effects allow firms with proprietary software to price its product in a strategic way preventing OSS from penetrating the market. One example can be the web browser. Since Microsoft put its web browser Internet explorer with windows OS, it gained dominance in the browser market. I think the 2 browsers: Internet explorer and netscape are almost perfect substitutes for the users and the firm with PS an take advantage of the network effect of the product and so retain its market advantage.

No. Like in the case study, I believe that the risks of uncertainty (like the incompatibility factor, learning curve, features available) make OSS/FS a less than perfect substitute for Proprietary software.
But I do agree that it IS a substitute; I know of many people that use open source OSs and like it... I just never feel comfortable enough to try it. I feel like they'll (the OS programmers) will be able to get into my computer and see what I am up to (although people can do so with proprietary software anyways).

I think, similarly to what other people already mentioned, that the biggest hurdle for OSS/FS is to compete with the network effect that companies like Microsoft with its Office and IE has achieved. First and foremost, Microsoft's leverages its dominance in the OS market to gain the upper hand in both the browser market and the office applications market. That is how, for example, Microsoft beat Netscape, even though Netscape had a first mover advantage. And although Firefox is quite popular, I believe it still doesn't come near to the amount of people who use IE, simply because it is the deafult browser in their Windows OS, and the regular basic users don't find a compelling enough reason to move to using anything else.

For having tried Linux (Ubuntu) which is full of softwares which tried to be "perfect substitues" of proprietary software, I really think that it depends of software (VLC, of which I speak in another topic is a really good substitute of Windows Media Player) but most of them are not as efficient as the one they tried to replace.
For example, Open Office is not as convenient as MS Office, The Gimp has not as many options as Photoshop, and Rythmbox has some good options but not manage iPod the same way iTunes do.

Naomi_Karnovsky wrote:I think, similarly to what other people already mentioned, that the biggest hurdle for OSS/FS is to compete with the network effect that companies like Microsoft with its Office and IE has achieved. First and foremost, Microsoft's leverages its dominance in the OS market to gain the upper hand in both the browser market and the office applications market. That is how, for example, Microsoft beat Netscape, even though Netscape had a first mover advantage. And although Firefox is quite popular, I believe it still doesn't come near to the amount of people who use IE, simply because it is the deafult browser in their Windows OS, and the regular basic users don't find a compelling enough reason to move to using anything else.

I would not agree with what you say about web browser. During last 6 years, Mozilla Firefox has been constantly strengthening its position in the market. Right now they have over 26 % around the world, and in Europe it is even more - 36%! so it is possible for OSS to become a really important player on the market.

more info and a graph is here: http://en.wikipedia.org/wiki/Usage_share_of_web_browsers

I am glad that this question has generated some discussion. Saying that OSS and PS are perfect substitutes may not be quite correct. Fistly, a good is said to be perfect if it is indistinguishable in use from another. They satisfy the same need or desire for the consumer. Generally it is very difficult to find a good that is a perfect substitute because they usually have slight variations. Hence, in this situation I would say that OSS and FS are not perfect substitutes, but it is safe to say that they are close substitutes. From the case the results for the the hypothsis 1 was partially supported. The WTP decreased only slightly. If the two were perfect substitutes then the hypothesis would be highly supported.


The link below shows the results of a survey conducted by Barracuda Networks to show the advantages of OSS and PS. The results reveal that PS have better vendor professional services, higher security, code quality and product functionality over OSS. On the other hand OSS has better bug fix turnaround and source code access. However a disadvantage of OSS is that it has lower security, and product functionality. Hence it is safe to conclude given these differnces, the two are not perfect substitutes.





http://news.cnet.com/8301-13505_3-9789275-16.html

This is a follow-up question, so that our discussion keeps going. Remember, you can still answer to the main question!

The city of Munich has switched to Linux / OSS. Was the switch a smart move in your opinion? Do you think that it may influence the way the city operates? may there be any problems with cooperation for with other cities?

Do you think that it was a smart idea from financial/political/economical/... (your idea here:) ) point of view?

In this case - are Windows and Linux almost perfect substitutes?

An article about the case is available here: http://www.h-online.com/open/LiMux-Munich-Linux-R-evolution-has-its-Imitators--/news/113629

Don't worry, it is very short;)

BartekWu wrote:This is a follow-up question, so that our discussion keeps going. Remember, you can still answer to the main question!

The city of Munich has switched to Linux / OSS. Was the switch a smart move in your opinion? Do you think that it may influence the way the city operates? may there be any problems with cooperation for with other cities?

Do you think that it was a smart idea from financial/political/economical/... (your idea here:) ) point of view?

In this case - are Windows and Linux almost perfect substitutes?

An article about the case is available here: http://www.h-online.com/open/LiMux-Munich-Linux-R-evolution-has-its-Imitators--/news/113629

Don't worry, it is very short;)

I think Linux is a solid alternative. Don't forget its completely free, and I guess the city of Munich has a lot of computers. So, there is a lot of money that can be saved. On the other hand, there is of course the compatibility problem. But, I still believe Linux is a good alternative.

What do you think?

As the case states, the move isn't directly a financial one (the change
its actually a bit more expensive!), but political: Munich municipality
(just like a company) has services to provide to its citizens, and
cannot be at mercy of software companies that decided to stop providing
maintenance of their former products. So they gain in stability and
reliability what they lose in short term finances.

Also, I like the idea emphasised that the success of the switch was
less due to technical aspect but human factors, as the system was
actually accepted by the employees. Also, even if some compatibility
problems remained, by giving extra training to its workforce, the city
made the most of the switch will compensate this in the long term.

Last, as Chifai pointed out, the municipality has a large network, so it is less impacted by compatibility problems.

It's not only the city of Munich that is an example of switching to Linux. Also other governments like China are stimulating the use of Linux. The compatibility problem becomes smaller, when more people are using Linux.

I think it's a personal choice. If you find that OSS and PS fit your needs than it can be considered a perfect substitute. But like Florent mentioned above regarding the translation software, the substitutes could not compete with his preferences/needs. So therefore the PS does not suffice.

Chi Fai_Cheng wrote:It's not only the city of Munich that is an example of switching to Linux. Also other governments like China are stimulating the use of Linux. The compatibility problem becomes smaller, when more people are using Linux.

To add more to the last post, alot of third world countries are starting to use Linux. To show how much Linux is widely use, i would like to share the names of places that have NOT been exposed to Linux which are: French Polynesian Islands, Solomon Islands, Pitcairn Islands, Norfolk Island, Saint Kitts & Nevis, Equatorial Guinea,, Christmas Island, Gambia, and Central African Republic. This is according to the Linux User Counter. http://counter.li.org/
Linux is starting to catch on. =)

I think if the move starts from the top, it should be a successfully switch. It is a battle of the sovereign power between public sectors(government) and private sectors(software company). I am looking foward seeing how things are going on.

Natalie_Garcia wrote:I think it's a personal choice. If you find that OSS and PS fit your needs than it can be considered a perfect substitute. But like Florent mentioned above regarding the translation software, the substitutes could not compete with his preferences/needs. So therefore the PS does not suffice.

So is it safe to say that once an individual derives the same utility from using either OSS or PS, then for that individual they are perfect substitutes? But for someone else who's needs are not equally satisfied, it is not a perfect substitute? What do you think?