A key fact that the distinction between use and sale value allows us to notice is that only sale value is threatened by the shift from closed to open source; use value is not.
If use value rather than sale value is really the major driver of software development, and (as was argued in [CatB] ) open-source development is really more effective and efficient than closed, then we should expect to find circumstances in which expected use value alone sustainably funds open-source development.
And in fact it is not difficult to identify at least two important models in which full-time developer salaries for open-source projects are funded strictly out of use value.
Let's say you work for a firm that has a business-critical requirement for a high-volume, high-reliability web server. Maybe it's for electronic commerce, maybe you're a high-visibility media outlet selling advertising, maybe you're a portal site. You need 24/7 uptime, you need speed, and you need customizability.
How are you going to get these things? There are three basic strategies you can pursue:
Buy a proprietary webserver. In this case, you are betting that the vendor's agenda matches yours and that the vendor has the technical competence to implement properly. Even assuming both these things to be true, the product is likely to come up short in customizability; you will only be able to modify it through the hooks the vendor has chosen to provide. This proprietary-webserver path is not a popular one.
Roll your own. Building your own webserver is not an option to dismiss instantly; webservers are not very complex, certainly less so than browsers, and a specialized one can be very lean and mean. Going this path, you can get the exact features and customizability you want, though you'll pay for it in development time. Your firm may also find it has a problem when you retire or leave.
Join the Apache group. The Apache server was built by an Internet-connected group of webmasters who realized that it was smarter to pool their efforts into improving one code base than to run a large number of parallel development efforts. By doing this they were able to capture both most of the advantages of roll-your-own and the powerful debugging effect of massively-parallel peer review.
The advantage of the Apache choice is very strong. Just how strong, we may judge from the monthly Netcraft survey, which has shown Apache steadily gaining market share against all proprietary webservers since its inception. As of June 1999, Apache and its derivatives have 61% market share -- with no legal owner, no promotion, and no contracted service organization behind them at all.
The Apache story generalizes to a model in which software users find it to their advantage to fund open-source development because doing so gets them a better product than they could otherwise have, at lower cost.
Some years ago, two programmers at Cisco (the networking-equipment manufacturer) got assigned the job of writing a distributed print-spooling system for use on Cisco's corporate network. This was quite a challenge. Besides supporting the ability for arbitrary user A to print at arbitrary printer B (which might be in the next room or a thousand miles away), the system had to make sure that in the event of a paper-out or toner-low condition the job would get rerouted to an alternate printer near the target. The system also needed to be able to report such problems to a printer administrator.
The duo came up with a clever set of modifications to the standard Unix print-spooler software, plus some wrapper scripts, that did the job. Then they realized that they, and Cisco, had a problem.
The problem was that neither of them was likely to be at Cisco forever. Eventually, both programmers would be gone, and the software would be unmaintained and begin to rot (that is, to gradually fall out of sync with real-world conditions). No developer likes to see this happen to his or her work, and the intrepid duo felt Cisco had paid for a solution under the not unreasonable expectation that it would outlast their own jobs there.
Accordingly, they went to their manager and urged him to authorize the release of the print spooler software as open source. Their argument was that Cisco would have no sale value to lose, and much else to gain. By encouraging the growth of a community of users and co-developers spread across many corporations, Cisco could effectively hedge against the loss of the software's original developers.
The Cisco story generalizes to a model in which open source functions not so much to lower costs as to spread risk. All parties find that the openness of the source, and the presence of a collaborative community funded by multiple independent revenue streams, provides a fail-safe that is itself economically valuable -- sufficiently valuable to drive funding for it.