Digitalization and decarbonization are the two most important social and economic issues of our time. Industry is also adapting to this: hardly a day goes by without another company wanting to become climate-neutral as quickly as possible. Achieving these ambitious goals requires a 'leapfrogging' approach, i.e. leapfrogging existing circumstances into a new world. Digitization is the key, but integrating it quickly, efficiently and fail-safe into all possible continents and business processes requires a collaborative, multinational approach without lengthy coordination at government and bureaucratic level.

With his invention of the Linux operating system 30 years ago, Linus Torvalds set a milestone in two respects: not only did he create a completely new operating system outside of a large tech corporation - virtually from his own living room, he taught the Microsofts and IBMs of this world a lesson - he also gave birth to the key strategic element for our major challenges in the 21st century: the open source approach. Torvalds showed that individual developers working independently of each other around the world on important software such as an operating system can deliver outstanding results - a masterstroke!

Open source and the software industry

Thomas Rappold: "Open source is the key to the urgently needed innovation leap towards digitalization and decarbonization of the economy and society."

© Thomas Rappold

Open source and commercial software providers were like fire and water for a long time: Steve Ballmer, Bill Gates' partner and his successor as CEO at Microsoft, even described the open source movement as a 'cancer' in 2001. Since Satya Nadella from India became Ballmer's successor in 2014, Microsoft has undergone a 180° cultural change. It was not without reason that Nadella chose San Francisco as the location and 5000 developers as the target group for his first major strategy speech. His goal: to return Microsoft to its roots and its original DNA as a 'developer company' - focused on the needs of software developers.

In 2019, the open source software industry saw some of the biggest acquisitions in its history. The most notable transactions: IBM bought Red Hat for $34 billion and Microsoft acquired GitHub, a public code repository platform with millions of developers, for $7.5 billion. According to figures from the tech analysis company CB Insights, the market volume of the open source services industry will grow to almost USD 33 billion by 2022 - almost double the 2019 figure.

At the end of 2018, Microsoft announced that it was making 60,000 patents for Linux available free of charge as open source software by joining the Open Invention Network Organization. In monetary terms, this is no mean feat, as Microsoft had earned around USD 3.4 billion from its Android patents by the end of 2014. Samsung alone paid Microsoft one billion dollars to license its Android patents. A clever move that did not leave even antitrust watchdogs unimpressed: Reuters reported almost simultaneously that the 7.5 billion dollar GitHub takeover was waved through by the EU without antitrust conditions. It was not without reason that the brilliant strategist Nadella praised the GitHub takeover with the words "Developers are the builders of this new era, writing the world's code. And GitHub is their home". In German: "Developers are the builders of this new era, writing the world's code. And GitHub is their home."

Importance of open source for the industry

Open source is now widely and deeply accepted by companies: According to a regular survey by the Linux Foundation, 85% of respondents said that their company at least sometimes uses open source components for non-commercial or internal purposes. 69% at least sometimes use open source code in commercial products, with this figure rising to 83% among technology companies. Participation in the open source community is significantly higher among technology companies, with 56% of respondents in technology companies stating that their company sometimes or often contributes code, compared to 43% of respondents overall.

The size of a company also correlates with its open source presence. Although large companies are often accused of just using the resources of the open source community without giving anything back, the data says otherwise: companies with more than 10,000 employees contribute code frequently 41% of the time, compared to only 14% of companies with two to 50 employees. The largest companies, many of which are Internet technology companies, have the resources to devote to projects that may not generate direct revenue. Smaller companies, while often using open source code in their commercial products, tend to focus more on their own company's projects than those on which they depend.

The Linux Foundation's survey also provides the answers as to why companies are so heavily involved with open source software: 55% of those surveyed stated that they had achieved an acceleration in innovation. The reason for this is a significantly higher speed of product development cycles - Elon Musk with Tesla and SpaceX sends his regards - but it also leads to a cultural change in collaboration through more interaction between departments that previously worked autonomously.

Industry 4.0 context

Open source software is playing an increasingly important role in industrial environments, as areas such as energy generation and manufacturing are becoming more and more interconnected. In 2020, electrical giant Bosch was one of the top 100 companies contributing to GitHub. The company relies heavily on open source software to develop its IoT Suite, a platform for connecting IoT devices and applications. Bosch has worked with the Eclipse Foundation, a community of developers and organizations that contribute to open source projects, to add basic features such as remote service interfaces and a backend for software updates to its platform.

Alongside Bosch, energy company Equinor is one of the largest open source contributors and has a community of over 35 active contributors on GitHub. In 2015, the company introduced an official policy that all the software it develops should be open source. It has also established six core values for its activities in the ecosystem, including transparency and collaborative participation. With more than 400 repositories on GitHub, Equinor contributes comprehensive solutions. These include the design of internal digital interfaces (data dashboards) and industry-specific solutions (reservoir forecasting, well logs) that address the specific challenges of energy companies.

Equinor's participation in the Northern Lights project, alongside Microsoft, Shell, Total and the Norwegian government, underlines the role of open source in solving global problems. The project uses open source software from Microsoft and makes the carbon capture, transportation and storage process available to the public for re-use and improvement.

Open source for investors - the 'Kafka' IPO

Vontobel's Subscription Economy Index (ISIN: DE000VQ8SSC7) is the first index certificate that allows investors worldwide to invest in the 20 most important shares of subscription-based business models that are also heavily involved in open source projects. The index covers the entire value chain with companies from the Infrastructure-as-a-Service (IaaS), Software-as-a-Service (SaaS), Subscription Management (Billing) Provider and X-as-a-Service (Xaas) sectors.

© Solactive

Confluent was co-founded in 2014 by CEO Jay Kreps, former CTO Neha Narkhede and Jun Rao. The three previously worked at LinkedIn, where they developed an event streaming software called 'Kafka' in 2011. The aim was to streamline the rapidly growing volume of messaging on the business and career platform. Kafka was subsequently released by LinkedIn as open-source software to the global developer community. Kreps, Narkhede and Rao sensed their opportunity and founded Confluent with the aim of offering customers commercial solutions based on the open-source Kafka communication protocol. Kafka is now one of the most popular open source projects ever. The Confluent founders also hit the nerve of the times: the increasing demand for real-time data exchange in the Industry 4.0, IOT and autonomous driving sectors requires a kind of data operating system. With its real-time data and streaming products, including the Confluent Platform software and the Confluent Cloud, Confluent focuses on real-time data processing tasks - what the company calls 'data in motion'. The IPO valued the company at around USD 8.3 billion. For the 2020 financial year, Confluent reported revenue of USD 236.6 million, an increase of 37% compared to 2019. In the first quarter of 2021, growth accelerated by 51% to USD 50.9 million. The example of Confluent shows that good money can be earned with open source business models.