Purpose – The software industry is rapidly being reformed by the collective development of open, common software – open source software (OSS) – sometimes being free at no charge, but always with the source code revealed for changing, testing and improvement. The purpose here is to examine the role and power of software in the economy and review the economic impacts of the trend to OSS on the software industry, largely from a European industrial and social perspective.Design/methodology/approach – The paper briefly traces the economic significance of the software industry and the dominance in packaged software of the large US publishers, the phenomena of natural monopolies building in software packages, and the need for different industry structure for Europe, as it exhibits a small to medium‐sized enterprise (SME) and system integrator structure. It then examines the balancing affects of OSS. The paper also addresses the role that poor software plays in creating new costs or externalities for its users wh...
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