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48Journal of Electronic Science and Technology of China Vol.2economics point of view, we will find that beyond thetechnical definition of OSS it is a public good whosevalue could be fully transferred.2.1 The Property of Public GoodThe software industry has two main significantproperties. First, the software industry is experiencinghuge economies of scale in that the development of thesoftware requires a large amount of investment, andthe cost of producing each additional copy will bealmost zero [1] . Second, the network effect, whichmeans that the benefit one consumer derives fromusing a product increases with the number of otherconsumers of the same product, is pervasive in thesoftware industry.Combined with the general properties of thesoftware market, the unique characteristics of the OSSwould contribute to its features of public good. As isdefined by economists, a public good is a resource thatis both non-rivalrous and non-excludable. It isnon-rivalrous if one person’s consumption of theresource does not reduce the amount available toothers. It is non-excludable if there is no feasible wayto block somebody from consuming the resource.On one hand, thanks to the economies of scale inproduction and the emergence of powerful networks,software can be copied and distributed at almost nocost. Thus the ordinary software fulfills the feature ofnon-rivalrous to some extent. On the other hand, due tothe prevalent phenomenon of piracy software, so far inChina the exclusion of people to use the proprietarysoftware freely seems very hard. The pervasive illegaldistributions for licensed software are due to thenon-excludable property of software to some extent.Furthermore, for the OSS, the fact that theinformation about how a program works, that is how itachieves its functionality, is contained within its sourcecode contributes to its non-rivalrous feature. One’sconsumption of that knowledge would leave as muchfor others as before. At the same time, it would be hardto exclude one’s knowledge of it to the extent thatknowledge is known generally [2] .The major concern with a public good must be thefree rider problem. The non-excludable nature impliesthere is not enough incentive for the users to contributeto the provision of public good. Thankfully, OSS is aspecial pubic good in that it is free of the mostchallenging issue in public good provision. Rather thanthe free rider problem of a typical public good, OSShas many enthusiastic free contributors [2] . According toLessig [3] , the OSS movements are completelyconsistent with a tradition of innovation anddevelopment outside the context of software.2.2 The Achievement of Full Value TransferAs a product of knowledge, the software’sconstitution of value differs from ordinary products.the value of a kind of software V is composed by itsvalue of application V a and its value of further exploitV fe , as shown below.V=V a +V feThe full value transfer of OSSV aOrdinaryProducerVConsumerV feProfessionaThe partial value transfer of proprietary softwareProducerVV aV feConsumerImplies that the consumers receive the valueImplies that the consumers achieve the value or that the producers retain the valueFig.1Comparison of OSS and proprietary software in the process of value transfer
No.3 LI Mingzhi et al: Open Source Software Movement: A Challenging Opportunity for the Development of China’s Software Industry 49As for proprietary software, the value transferfrom the producers to the users is partial, since theright to further exploit the software is retained by theproducers. While for OSS the situation is different.With the source code available free and the right tomodification, reuse and re-distribution of the software,not only can the users receive its value of application,but the professional users can also modify or enhancethe software for themselves. Fig.1 describes theprocess of value transfer of the two kinds of software.The characteristics of full value transfer whichgives users access to the working mechanism of thesoftware and permits modification, reuse andre-distribution of the software, makes OSS appealingto the Chinese government that wants to break thedominance of western software companies in theoperating system and applications market, helpingdomestic software industry growth.Contrast to the proprietary software, the intrinsicadvantage that OSS is a public good whose value couldbe fully transferred, serves one reason why the Chinesegovernment takes efforts to promote the developmentof OSS in China.3 The Software Industry in ChinaAnother reason for the Chinese government’spreference to OSS should be regarded with the currentstatus of the software industry in China. In recent twodecades, China’s high-tech industry has experiencedrapid development at a faster pace than the wholeeconomy, in which the software industry iscontributing increasingly more weight. In the past 10years, China’s software industry revenue has beengrowing at an annual rate between 20%~40%. Tab.1shows that China has a huge domestic market for thethree diversified software products.. In 2002, China’sapplication software accounted for 64.5% of the totaldomestic software products.Tab.1 The structure of software products in China (from 1992 to 2001)YearThe system software The maintenance software The application softwareRevenue(RMB10million) Proportion/(%)Revenue(RMB10million)Proportion/(%)Revenue(RMB10million) Proportion/(%)1992 1.6 8 5.4 27 12.8 651993 3.6 9 10.8 27 25.6 641994 4.5 9 13.2 27 31.3 641995 6.5 10 15.0 22 46.5 681996 8.5 9 20.0 22 63.5 671997 13.7 12 27.5 25 70.8 631998 17.4 13 35.9 26 84.7 611999 21.0 12 44.8 25 110.2 632000 33.2 14 49.6 21 155.0 652001 50.0 15 81.9 25 198.1 60Although China’s software industry has achieveda great success, there are still some major problems,which are becoming the obstacles in the path ofChina’s software industry development. We willanalyze these problems which may account for theChinese government’s promoting action on OSSmovement in three different levels: the industry level,the producer level, and the consumer level.3.1 Industry Level3.1.1 Analysis of StatusBelying the rapid growth, small scale and lowtechnology level tell the truth of China’s softwareindustry today. According to the Bulletin of ChinaSoftware Industry Association (2001), the total revenueof software in China only accounts for 1.5% of theworld’s total revenue of software in 2001. Furthermore,China’s software industry lacks senior professionals incore technology for the software. In 2002, of 59 000software personnel, 7% had Master degrees, 33% hadBachelor degree, and 17% had polytechnic degrees,and there were only 157000 research and developmentprofessionals scattered among 4 700 companies. On
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