Open source is often misunderstood, even among senior IT executives, says Mr Jim Whitehurst, Chief Executive Officer of Red Hat ( www.redhat.com ). There are multiple components - it is not just about software, or licensing costs, it's truly a new way of thinking about economics that reduces the cost of technology worldwide. In a keynote address on "Harnessing the Power of Open Source", which he delivered as part of the Infocomm Development Authority's Distinguished Infocomm Speaker series, Mr Whitehurst touched on "the economics of abundance", the power of sharing, how to participate in the great open source adventure.

How is open source different?
Open source is fundamentally a different and better production model for information in the 21st century. Software is freely "copyable" - the marginal cost of copying software is virtually zero. The way economics worked in the 19th and 20th century world of scarcity, that was bad because how did you sell something that was freely copyable?

Mr Whitehurst: One thing that happens when information is freely available and freely copyable is that it gets more powerful, better, faster and cheaper.

Unfortunately, the answer at the time, was, "Let's make it so we can't copy". Let's use copyright and patent laws, and create scarcity. What we basically did was to take the power around information and the ability to copy that information, and bottle it up, to make it perform the way hard assets have performed for generations. The problem with that is, we locked up the key feature around information - the fact that it becomes more valuable the more widely you disseminate it, and the more participative it is.

In the late 1980s, Linus Torvalds flipped it around and said, let me invite people to contribute to what I'm doing and therefore I'll have a better operating system.

How is it better?
One thing that happens when information is freely available and freely copyable is that it gets more powerful, better, faster and cheaper.

What Linus Torvalds said was: the functionality is free. But if you want to use it, you must contribute to it. In doing so, he created a new and fundamentally different, more powerful way to develop software.

For example, Red Hat Enterprise Linux is the most secure operating system as certified by the Russian military. Why? Because a few years ago, as part of their participation in open source, the NSA (United States' National Security Agency) and CIA (Central Intelligence Agency) wrote the security protocols that became the foundation for it. It shows the power of the model and the power of sharing. By opening up, the information itself becomes more valuable. By giving it away, we've made it more valuable.

It is also a superior way to meet customer needs. When we develop functionality, we do not guess what the customer wants - the customers are involved in writing the solution. As a company, we may not be able to lock up that functionality and extract abnormal rents associated with it, but by sharing, we have been able to make a better, more accepted component.

Think about Wikipedia. Basically, it has far surpassed the amount of information ever printed in an encyclopedia, even online proprietary encyclopedia, because tens of thousands of people have started to participate and contribute. For very little money, Wikipedia has created the largest content encyclopedia by far that has ever existed. Facebook and Web 2.0 are powerful models based on other people contributing information.

The subscription model
We don't sell functionality. You sign up for a subscription and pay monthly or yearly over a period of time. Sounds straightforward, but the behaviour that those different economic models drive is profound.

The typical proprietary software company's software model requires that they generate incremental licence revenue. You have a piece of software, you're happy with it, and once every three or four years, you have to buy the upgrade. You have to re-buy the same functionality.

Actually, because the software company is motivated to upgrade, it adds more functionality, but studies have shown that 90 per cent of the functionality in an average piece of software is never used, so your upgrades add functionality that people don't want.

We add functionality that customers want but we don't charge for it. You don't have to download it if you don't need it. The type of motivation that it drives is different.