The Linux Foundation has released a report estimating the Linux kernel to be worth $1.4 billion, and the Fedora 9 distribution to be worth just over $10 billion. The report is an update of a 2002 report estimating the worth of Red Hat Linux 7.1 (Fedora is the community edition of Red Hat Linux, renamed in 2003). The report doesn’t attempt to estimate the worth of the total Linux ecosystem, as some early speculators suggested it would, but instead sticks to the hard facts. The estimation is an industry standard formula-based analysis of current lines of code in the Linux kernel (7 million) and Fedora packages (200 million), calculating what it would cost to develop the kernel and Fedora distribution from scratch under present-day developer salaries and operating costs. The original and updated reports both include the kernel in the calculation of the distribution as a whole, but the new report breaks out a separate figure for the kernel, highlighting its significance within the distribution.

One important perspective to carry away from this report is the astounding pace of Linux development. The 2002 report, which used the same tools for counting lines of code, and the same formulas for calculating total cost of development, listed Red Hat Linux 7.1 as worth $1.2 billion. There was some variation in the Fedora packages used for the the two reports, and for the sake of comparison the current report offers an alternate calculation using the lower operating costs of 2002 ($8 billion instead of $10 billion). Even so, we’re looking at a distribution that’s worth seven times what it was worth six years ago. Averaged out, that would mean every year sees an investment of time, money, and effort roughly equivalent to the entire history of Red Hat up to 2002.

In acknowledging the community and corporate contributions that made development of the Linux kernel and distributions possible, the report briefly touches on broader implications for open source development in general.

The companies and individuals who work on Linux-related projects and build this value proﬁt by sharing the development burden with their peers (and sometimes competitors.) Increasingly it’s becoming clear that shouldering this research and development burden individually, as Microsoft has done, is an expensive approach to building software. While monopoly position in the past has allowed them to fund this massive development, we believe that in the future competition from collaborative forces will make such an isolated position untenable.

More and more companies are turning to Linux and open source software to radically cut R&D or licensing costs. In the current economy, that trend is sure to increase.