Open Source Software has been all about myths until recently, with many people believing that open source isn't reliable because the open source projects are held by a small group of amateurs in their friend's garage. Such myths have been refuted with the emerging success and increased popularity of open source, but still many considered open source and proprietary software to be enemies, which can never co-exist in the corporate platform. As a result, some firms have decided to stick to their tradition of commercial software development, while new firms, which base their corporate strategy solely on open source, have emerged. The former group of firms has suffered from losing time and money in fixing the errors and bugs in the software, whereas the latter group has found difficulties in finding financial support and market share in competition among the former group.

Neither group has found absolute success in their business, as result a compromise model has emerged in the software industry, which resulted in a third group of firms that work neither with pure open source model nor with pure proprietary models, but instead with “hybrid” business models which allows integration of these so-called two enemies. Such firms have overcome the pitfalls of both approaches, while combining the benefits of them. The growing success of open-source integration attracted further public attention on the potential importance of open-source software (OSS). Indeed, major large commercial IT companies have started to integrate open-source software into their core strategies. Despite the widespread doubts and resistance during the early stages of open source revolution, there has recently been a “change of perception” in the software development industry towards incorporating open source strategies into their business models.

This master thesis investigates the open source software scene in Sweden by examining Swedish firms that develop software products either based on open source components (hybrid model) or just open source products (pure open source model). After analyzing the market based on the business models of these firms, further details of the open source strategies pursued by these firms have been analyzed. Our study then finalizes the investigation with an analysis of the open source development scene in Sweden, which we use to determine the characteristics of the software industry in Sweden.

Our conclusions reveal that open source strategy shares most of its components with innovation strategy (with some components found to be specific to open source strategy only), confirming the link between open source software and innovation. Therefore, firms that work with open source software have to pay attention to innovation and form an appropriate innovation and open source strategy if they want to be successful in the software industry.