The erosion of the open source cost advantage

Australian governments have embraced open source technology for good reason: it promises flexibility, transparency and, most importantly, better value for public money.

The logic seems simple. If software is ‘open’, no single company controls it. That should mean more competition, lower costs, and greater accountability, but in practice, many government departments now run open source platforms that depend heavily on a single supplier. The software may be open source, but the commercial relationship is often the opposite.

This matters, because when competition fades, costs tend to rise, and taxpayers eventually pay the difference.

Open source promised two strategic advantages: reducing costs and introducing strategic contestability to keep those costs lower for longer — and access to a wider set of technical innovation that proprietary software couldn’t deliver.

Across Canberra and state governments, open source platforms are widely used to underpin everything from Services Australia’s digital service platforms to state-based hospital systems and transport authorities. Critical public services now rely on complex technology foundations that must operate reliably for years at a time. Once adopted, these platforms often become the standard operating environment across multiple agencies. Skills, procurement panels and support contracts align around one dominant provider within that ecosystem.

None of this is improper. In fact, it often begins with sensible decisions, reducing complexity, building internal capability and standardising systems. The problem is what happens over time.

When a single supplier becomes deeply embedded across government systems, switching becomes difficult. Even if alternatives technically exist, the contractual barriers and terms of use are increasingly prohibitive or monopolistic. Thus, competitive tension diminishes not because options disappear, but because contracts become too draconian.

The premise of open source’s two strategic advantages just lost 50% of its value: keeping costs lower, for longer. Instead, the opposite is now occurring.

For everyday Australians, this might sound like an abstract procurement issue. It isn’t: it’s about commercial sovereignty. While there is a growing discussion about digital sovereignty, the other side to that coin is commercial.

Digital platforms now underpin core public services: the way Australians access Medicare, register vehicles, apply for permits, or receive disaster assistance increasingly depends on stable and affordable digital infrastructure. If competition narrows within those foundational systems, governments have less leverage in negotiating costs and service terms. Over time, that can translate into higher operating expenses and fewer resources available for frontline services.

At a time when budgets are tight and governments are asking agencies to do more with less, ensuring genuine contestability in technology markets should be a priority.

It’s well understood in the IT procurement circles that some open source vendors with central contracts are jacking up their annual pricing by 12% year on year while others are at 70–80%. This is not theoretical for governments — even less so for the taxpayer.

Open source is also often linked to that idea of digital sovereignty; the ability for governments to control and shape their own technological destiny. But sovereignty is not just about where code is written or where data is stored — it is also about commercial independence.

If a department cannot credibly turn to an alternative provider within its core technology stack, its bargaining position weakens. Even in open ecosystems, commercial concentration can emerge if governments do not actively preserve competitive pathways.

Reviews by the Australian National Audit Office (ANAO) have repeatedly highlighted the importance of strong procurement governance and long-term value for money in major ICT programs. Contestability is not a one-off event at contract signature; it is an ongoing condition that requires active management.

None of this suggests governments should move away from open source. On the contrary, open source platforms remain a powerful way to avoid traditional proprietary lock-in. But ‘open’ should not be treated as a guarantee of competition. It’s a starting point, not an outcome.

True contestability requires deliberate choices. Procurement frameworks need to encourage multiple providers within the same ecosystem. Agencies need to maintain portable skills and interoperable architectures that allow for genuine alternatives. Periodic review of platform decisions should be standard practice, not an exception triggered by a crisis.

These measures may seem technical, but their implications are tangible. When governments retain competitive leverage, they are better positioned to negotiate fair pricing, demand service improvements and adapt systems to changing public needs. When they do not, options narrow and costs accumulate quietly in the background.

For taxpayers, the question is straightforward: Are our digital foundations structured to keep suppliers competitive over the long term, or have convenience and standardisation gradually reduced that pressure? Open source technology was embraced to improve value for money and reduce dependency. To deliver on that promise, Australia must ensure that competition remains real and not assumed. *Ben Henshall is an open source technology expert and Australia and New Zealand general manager for SUSE. He will be speaking at the upcoming SUSE Summit in Sydney on how AI is reshaping enterprise infrastructure.

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