Governments should use spending power to change PC and office software markets

Governments should seriously consider to act as leading customers to enhance competition on the market for PC operating systems, office applications and enterprise content management software, suggest micro economists at the Netherlands Bureau for Economic Policy Analysis (CPB). Governments should also require open source software in public procurement. 


The CPB economists write these three markets are 'tentative examples' of inefficient markets. Such markets suffer from vendor lock-in and the lack of competition is stifling innovation. Normal economic processes are not strong enough to correct such failing markets. "This will not lead to optimal choices of licensing, price, quality and innovation."

The CPB study is meant to brief policy makers on potential failures of software markets. The report provides decision trees. This is an instrument that gives policy options, depending on the answer of questions such as whether or not there is vendor lock-in and whether or not proprietary software is better than open source in terms of innovation and competition.

If customer lock-in is not a serious problem and if there are no substantial barriers for open source competitors, then general competition policies should be sufficient to deal with competition problems in software markets. However, if there are serious problems, then policy measures are desirable, the economists write.

Examples

One of the authors, economist Paul de Bijl, explains why the CPB only lists tentative examples. "This report does not give policy advise. This is a study based on economic literature to analyse software markets." However, adds De Bijl, the current desktop operating system market and the office application market are examples of markets that make it difficult for users to switch to alternatives. "Users of alternative products are an exception. Their numbers are limited and the systems do not interoperate well."

The CPB's economic analysis 'Competition, innovation and intellectual property rights in software markets' was published on 3 March. The analysis was requested by the Dutch ministry of Economics, responsible for the country's policy on open source and open standards.


More information:

CPB statement (in Dutch)

Competition, innovation and intellectual property rights in software markets (in English, pdf)

Source: Osor