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DERTOUZOS: It is ironic to me that in the United States, the bastion of capitalism, where people have given of their work lives and capital to create a huge industrial economy, we are now asked to surrender the very same factors of production-our labor and our capital-to develop software that will be open and free for all. I do see some qualified benefits to open software, but I wanted to get your views on the big picture before going any deeper.

GATES: Most of the people and companies that create intellectual property will continue to want to get some payment for it, as with any creative area. The beauty of all intellectual property compared to physical property is that there is no marginal cost of production. The world benefits immensely from this, whether it’s from a great book or a new drug or a new piece of software. There are fixed costs, so most work will cost something, but for software sold on a high-volume low-price model the price is very small compared to the value.

There’s always been a role for open-source software, and there always will be. Free software has been around for a long time. Likewise there is commercial software where the source is easy to access so the pricing and the source availability are two different things. Ideally, software should be componentized enough that you could extend it without having to read and rebuild the source code of the product.

For any software to gain widespread acceptance and use-to be popular with consumers and corporate customers-it has to possess the infrastructure and support that make it efficient and easy to deploy. So just as the car became popular only when there was a network of gas stations, repair shops, dealerships, paved roads and so on, the same is true for software and most other products.

The role of common standards in intellectual property is central here. Thanks to a common operating system standard-Windows-a whole industry got created, one that employs more than five million people worldwide. When both hardware companies and independent software vendors have a common standard to work with, the end result is enormous choice for consumers.

Open-source software’s strength is massive customization but this works against consistency. Consumers don’t know what to expect when they load the software; corporate customers find it hard to stay current as each version is customized; developers don’t get a volume market because there are multiple flavors of the same product.

A lot of software that started out as university software-like browsers-transitioned to become commercial software when customers asked for rich features and broad support. In the case of browsers they stayed free because of the advertising value and additional demand for complementary products that they create.

DERTOUZOS: I agree with you that there is a role for all three-commercial, open, and free software-and add to the list another important benefit of open software: It accumulates for everyone’s use code contributed by many programmers. But what of commercial software, that has the potential of becoming a standard for millions of people? To be used widely, it will be given away initially, and sold later when it has taken hold. In the long term, after the software has stabilized and returned its development cost and a good profit, software developers may find it increasingly difficult to charge for it. I suspect that such software, and maybe most software, will, after a commercial period, become very low-cost, and in some cases, even free. Do you think this is likely?

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