Quantifying the Value of Open Source Hardware Development

Citation: Joshua Pearce (2015) Quantifying the Value of Open Source Hardware Development. Modern Economy (RSS)
DOI (original publisher): 10.4236/me.2015.61001
Semantic Scholar (metadata): 10.4236/me.2015.61001
Sci-Hub (fulltext): 10.4236/me.2015.61001
Internet Archive Scholar (search for fulltext): Quantifying the Value of Open Source Hardware Development
Download: http://file.scirp.org/Html/1-7200941 53076.htm
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Summary

Author explores methods to quantify the value of Free/Open Source Hardware (FOSH) design and uses as a case study an open-source syringe pump (OSSP) design.

1) downloaded substitution valuation

"simply scaling economic savings from distributed manufacturing that has been previously demonstrated"

Incorporates number of times design accessed, probability access results in use in a product, and cost saving vs. traditional design/manufacturing.

Based on 424 OSSP downloads, estimate "between $778,000 and $12.4 million" value in 1 year.

2) avoided reproduction valuation

"using development costs is similar to that employed to calculate the value of Linux"

For a single firm, cost of replicating design if it were not available; extrapolate across all relevant firms.

Using 424 downloads as proxy for number of firms that might want to design or hire contractor to design, obtain $5.8 million value in 1 year.

3) market savings valuation.

"is only valid when the FOSH has dominated the entire market and should thus be viewed as an upper bound, with the market elasticity caveat"

If 3D printing could capture entire market for a product, calculate cost saving based on market size for product.

Method should only be used for products that gain significant market share, but hypothetically if OSSP "captured the entire 2019 market it would result in about $767 million in value saved for the global community that year and every year after."

4) Secondary Streams of Value

Extend previous models with secondary increased market, research and educational, medical, and other benefits.

Increased market: "if a relativity inelastic ratio of 1% demand increase for each 10% drop in price the syringe pump market is assumed, the market might be expected to increase between about 5.9% - 9.3%, which in 2019 would be between an additional value of $45 - $71 million."

Research and Education: accounting for reductions in university overhead costs "would lead to FOSH values of over $4.3 million and over $2.7 million for methods 1 and 2, respectively." ... "Quantifying the value of an increased rate of discovery entails a specific study in each lab that would need to be done after the discoveries were made with controls for similar labs operating with less or inferior equipment. Qualitatively, however, it is clear that FOSH that has scientific applications and that costs less than commercial offerings has values set by the minimums of the three core methods." ... "if because of its lower costs the OSSP was able to be used in the classroom or lab courses at either the university or pre-college education, the improved education that students received because of access to it would be positive as would the tertiary effects of their contribution to the economy. Again, future work is needed in specific case studies to ascertain this value, however, for the purposes of this study it is clear that any FOSH that have educational applications and that costs less than commercial offerings has values set by the minimums of the three core methods."

Medical: Would require extensive testing and certification, but if done study could be run; expect most value "to accrue in regions where low-cost medical equipment is sorely needed now"

Other: Environmental impact, generally favors 3D printing over centralized manufacturing and shipping. Would be small for OSSP because of small size.

Conclusion:

"his paper successfully provided three methods of quantifying the value of free and open source hardware in order to provide economic justification for the support in FOSH development investment. The methods are relatively straight-forward to institute and are based on reliable freely-available data with minimal assumptions. The case study presented found millions of dollars of economic value from a relatively simple scientific device being released under open-licenses. This represents orders of magnitude increase in value from proprietary development. It is clear that FOSH development should be funded by organizations interested in maximizing return on public investments particularly in technologies associated with science, medicine and education."

Theoretical and Practical Relevance

Author runs Michigan Tech Open Sustainability Technology Lab.

Other summary at http://opensource.com/life/15/2/the-worth-of-open-source-hardware-design