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Leveraging Open Source and Avoiding Risks in Small Tech Companies

Today’s software development is geared more towards building upon previous work and less about reinventing content from scratch. Resourceful software development organizations and developers use a combination of previously created code, commercial software and open source software (OSS), and their own creative content to produce the desired software product or functionality. Outsourced code can also be used, which in itself can contain any of the above combination of software.

There are many good reasons for using off-the-shelf and especially open source software, the greatest being its ability to speed up development and drive down costs without sacrificing quality. Almost all software groups knowingly, and in many cases unknowingly, use open source software to their advantage. Code reuse is possibly the biggest accelerator of innovation, as long as OSS is adopted and managed in a controlled fashion.

In today’s world of open-sourced, out-sourced, easily-searched and easily-copied software it is difficult for companies to know what is in their code. Anytime a product containing software changes hands there is a need to understand its composition, its pedigree, its ownership, and any open source licenses or obligations that restrict the rules around its use by new owners.

Given developers’ focus on the technical aspects of their work and emphasis on innovation, obligations associated with use of third party components can be easily compromised. Ideally companies track open source and third party code throughout the development lifecycle. If that is not the case then, at the very least, they should know what is in their code before engaging in a transaction that includes a software component.

Examples of transactions involving software are: a launch of a product into the market, mergers & acquisitions (M&A) of companies with software development operations, and technology transfer between organizations whether they are commercial, academic or public. Any company that produces software as part of a software supply chain must be aware of what is in their code base.

 

Impact of Code Uncertainties

Any uncertainty around software ownership or license compliance can deter downstream users, reduce ability to create partnerships, and create litigation risk to the company and their customers. For smaller companies, intellectual property (IP) uncertainties can also delay or otherwise threaten closures in funding deals, affect product and company value, and negatively impact M&A activities.

IP uncertainties can affect the competitiveness of small technology companies due to indemnity demands from their clients. Therefore technology companies need to understand the obligations associated with the software that they are acquiring. Any uncertainties around third party content in code can also stretch sales cycles. Lack of internal resources allocated to identification, tracking and maintaining open source and other third party code in a project impacts smaller companies even more.

Along with licensing issues and IP uncertainties, organizations that use open source also need to be aware of security vulnerabilities. A number of public databases, such as the US National Vulnerability Database (NVD) or Carnegie Mellon University's Computer Emergency Response Team (CERT) database, list known vulnerabilities associated with a large number of software packages. Without an accurate knowledge of what exists in the code base it is not possible to consult these databases. Aspects such as known deficiencies, vulnerabilities, known security risks, and code pedigree all assume the existence of software Bill of Materials (BOM). In a number of jurisdictions, another important aspect to consider before a software transaction takes place is whether the code includes encryption content or other content subject to export control – this is important to companies that do business internationally.  

Solutions

The benefits of OSS usage can be realized and the risks can be managed at the same time. Ideally, a company using OSS should have a process in place to ensure that OSS is properly adopted and managed throughout the development cycle. Having such a process in place allows organizations to detect any licensing or IP uncertainties at the earliest possible stage during development which reduces the time, effort, and cost associated correcting the problem later down the road.

If a managed OSS adoption process spanning all stages of a development life cycle is not in place, there are other options available to smaller companies. Organizations are encouraged to audit their code base, or software in specific projects, regularly. Some may decide to examine third party contents and the associated obligations just before a product is launched, or in anticipation of an M&A.

 

Internal Audits

The key here is having an accurate view of all third-party, including OSS, content within the company. One option is to carry out an internal audit of the company code base for the presence of outside content and its licensing and other obligations. Unfortunately manually auditing a typical project of 1000-5000 files is a resource and time consuming process. Automated tools can speed up the discovery stage considerably. For organizations that do not have the time, resources or expertise to carry out an assessment on their own, an external audit would be the fastest, most accurate and cost effective option.

 

External Audits

External audit groups ideally deploy experts on open source and software licensing that use automated tools, resulting in accurate assessment and fast turnaround. A large audit project requires significant interactions between the audit agency and the company personnel, typically representatives in the R&D group, resident legal or licensing office, and product managers. A large audit project requires an understanding of the company’s outsourcing and open source adoption history, knowledge of the code portfolio in order to break it down into meaningful smaller sub projects, test runs, and consistent interactions between the audit team and the company representatives.

Smaller audit projects however can be streamlined and a number of overhead activities can be eliminated, resulting in a time and cost efficient solution without compromising details or accuracy. An example would be streamlined machine-assisted software assessment service. The automated scanning operation, through use of automated open source management tools, can provide a first-level report in hours. Expert review and verification of the machine-generated reports and final consolidation of the results into an executive report can take another few days depending on the size of the project.

The executive report delivered by an external audit agency is a high level view of all third party content, including OSS, and attributes associated with them. The audit report describes the software code audit environment, the process used, and the major findings, drawing attention to specific software packages, or even software files and their associated copyright and licenses. The audit report will highlight third party code snippets that were “cut & pasted” into proprietary files and how that could affect the distribution or the commercial model. This is important for certain licenses such as those in the GPL (GNU Public License) family of OSS licenses, depending on how the public domain code or code snippet is utilized.

The report significantly reduces the discovery and analysis effort required from the company being audited, allowing them to focus on making relevant decisions based on the knowledge of their code base.

Conclusion

Third party code, including open source and commercially available software packages, can accelerate development, reduce time to market and decrease development costs. These advantages can be obtained without compromising quality, security or IP ownership. Especially for small companies, any uncertainty around code content and the obligations associated with third party code can impact the ability of an organization to attract customers. Ambiguity around third party code within a product stretches sales cycles, and reduces the value of products and impacts company valuations. For small organizations, an external audit of the code base can quickly, accurately and economically establish the composition the software and its associated obligations.

 

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