UK missing golden open source opportunity, finds report

We can't grow here, say open source tech firms

Open source software and services provide more than a quarter of the UK's tech sector value, but companies have to go to the US to grow, finds an OpenUK study

Unlike most of the UK economy, the technology sector is growing, but a significant part of that sector, open source software companies, have to go outside the UK to secure funding.

That was a finding by non-profit advocacy group OpenUK, whose research into the economics of open source was published last week.

At an estimated worth of £13.59 billion, open source software and services makes up 27% of the total value of the UK tech sector. Furthermore, purchasing plans for the next 12 months suggest open source could add a further £225.2 million to £326.6 million to the UK economy in the coming, according to OpenUK's calculations.

And yet, open source is often treated as a second class citizen.

Under the radar

There are several possible reasons for this.

Open source is under the radar and tends to be ignored by the politicians and investors. That's because, with a few exceptions, open source software is not generally consumer-facing. Instead, it is the web servers, cloud technology, networking solutions and middleware that everything else is built on. It's hidden away.

"Open source is the submarine under the digital economy," said OpenUK CEO Amanda Brock at a press event to launch the report, crediting that quote to former government national technology adviser Liam Maxwell.

Usage of open source software is also hard to measure, depending on proxies such as number of GitHub contributors. Not being particularly amenable to analysis using traditional economic yardsticks such as TCO and ROI, its importance is often underestimated.

And scaling open source companies is hard. It requires experience, expertise and investors who understand that open is a very different model from proprietary.

Unfortunately, UK policymakers' understanding of open source is patchy and out-of-date, and it does not receive the accolades accorded to other tech ventures. This contributes to the risk aversion and fear of failure long typical of UK investors, leading many British companies to cross the Atlantic for funding. This means registering the business in Delaware and thus becoming an international business.

"We're not considered British", said Alexis Richardson, CEO of London-based cloud native software firm Weaveworks which did just that, complaining that despite its considerable successes, politicians bypass the firm by when doing the glad-handing rounds.

Other companies in the OpenUK report [pdf] had similar stories to tell, including Snyk, whose CEO found British investors too risk averse, and database firm Percona, who's founder Peter Zaitsev said the US understands how to market open source better than the UK. Of course, this is not a peculiarly British issue: the French founders of Docker also had to migrate to California in search of gold.

An open opportunity

In fact, the UK is particularly well stocked with talented technologists, versatile engineers and enterprising innovators who have the inbuilt having the advantage of the English language, but the country lacks the sort of backing and cheerleading that their counterparts in the US, particularly Silicon Valley, enjoy.

"The reason they're under the radar is their position as international companies," said Brock.

"The economics mean that they're generally scaled in the US where we see that the investors are more willing to take risk, and they're more willing to take risks because they understand that risk. The risk is quantifiable to them.

"Many of the investors have flipped open source companies themselves, and you have this density of companies that have made big money out of open source. And that's something that we've not yet seen in the UK."

While the situation is improving slowly, investment in open source companies is still not growing at the same rate as with other tech, she said. At a time when more and more businesses are using open source software, the UK sector is not receiving adequate support.

UK investment in open source is only one twentieth that of the US, said Jen Barth, chief research officer at OpenUK.

"The amount of money invested in open source software, growth businesses and AI this year in the UK was in the 20 billions, and in the US was in the 400 billions. So that is just a massive difference."

As VC funding dries up in Silicon Valley, this could be an opportunity for the UK, or possibly a portent of leaner times all round.

Amanda Brock will be speaking at Computing's UK IT Leaders Summit in October. Register today.