r0ml has an incredibly interesting article up on O'Reilly's ONLamp, Calculating the True Price of Software, wherein he applies an options pricing model to software cost.
The neat upshot for open source software is that a significant cost of a software license is the implied call option on maintenance. Think about it, how much would people pay for a software license--closed source or otherwise--if there was no chance of maintenance, no accountability, no support? Not much, if anything, right? The availability, even if not exercised, has much value. He concludes with
[Open source is] converting warrants on future maintenance and enhancements into options, which means that instead of having a sole supplier (warrants), we have created a third-party market (options) of these derivatives.
How capitalistic is that?
Coincedently, on Jon Trowbridge's recommendation, I have recently been reading Black Scholes and Beyond: Option Pricing Models, the classic text on Black-Scholes and other option pricing models.
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