In economics, we have two concepts, -- competing products and substitutes. Competing products are other brands in the same category. Substitutes are products in another category that perform much the same function. If I don't like Nescafe, I'll go with Moccona (a competitor), but if I read a medical report finding that coffee is extremely dangerous, I will drink tea rather than coffee when the urge hits me. It's not the same thing, but I could bring myself to settle for tea. That's what a substitute means.

It's more difficult to switch to a substitute than to a competing product, but it can be done when there are compelling reasons. Open Source software is a substitute, not a competitor, to the entire category of proprietary commercial software. It requires a different mindset and a willingness to work with different development and support mechanisms. That's what makes its uptake less than straightforward.

With both substitutes and competitors, "good enough" is a great reason to switch when the price is far lower, and that is what Open Source offers. But with substitutes, there is an extra mental adjustment process that consumers need to go through before full acceptance happens. That takes time. Consumers need time to gain confidence from the positive examples of early adopters. The current situation with Open Source in the marketplace reflects exactly this stage of the proceedings. Potential savings and a greater degree of control over one's destiny are the compelling arguments that will encourage the switch. When the mental adjustment process is complete, the downfall of proprietary software could be swift (put options on Oracle, anyone?).

"Open Source may release value, but it doesn't create value"

New thinking among financial analysts has discovered that most firms reporting improved earnings year after year are doing so by cutting costs rather than by increasing revenue. By reducing waste and improving productivity, companies are "releasing" value that was hitherto "locked up" in inefficient processes. But they aren't creating new value. They're not innovating. True wealth comes from new ideas, and there don't seem to be too many of them. So there are natural limits to how far these companies can go before they hit a plateau.

Isn't Open Source something similar? Sure, it'll help us reduce costs, but is it helping us create anything? It's nothing more than a cheaper substitute for our existing software, so its long-term impact will probably be marginal, not revolutionary.