Read an interesting and insightful quote from Bruce Perens, creator of Open Source definition, in infoworld
http://www.infoworld.com/infoworld/article/08/03/24/13FE-open-source-roundtable-question-2_1.html
Perens: "I think that most reporters are misreading the economics of open source, and I hope that changes. You see a lot of publicity for companies that put open source in a profit center, like MySQL. But for most companies, open source is operated in an IT cost center. Many open source developers are paid these days, but the majority are actually working for customer, not vendor, organizations. For those companies, open source is a way to distribute the cost and risk of developing non-business-differentiating software that they need to support their own operations, but which isn't particularly visible to their customers."
There are some parallels I see between Open Source and outsourcing. The economics of open source development and deployment is hard to beat because of the low cost of participation in development and the low proportion of shared cost a user incurs. Quite similar is outsourcing as I am able to see for our customers. By pooling resources that can be split by our clients, and through a global distribution model, we provide a hard to beat software development model.
Open Source may not displace highly specialized software because of its very nature. Widespread programmers may not have the dedicated time or knowledge to build such software. Similarly, a business would require its specialists that represent its core competence while cost effectively engaging outsourcing companies for development. For the software development vendor, there is a lot riding on successful delivery. It needs to compete in terms of quality and budget to keep the customer. Thereby, for the business it is keeping its knowledge within, engaging with competing providers in keeping the fixed costs low.