The term 'open source' first arose out of a strategy session held on February 3, 1998* at Palo Alto, California, which included Todd Anderson, Chris Peterson of the Foresight Institute, Jon "Maddog" Hall and Larry Augustin of Linux International, Sam Ockman of the SVLUG, and of course, Eric S. Raymond. This session came up after Netscape's announcement that January 22 that they would be releasing the complete source code of their web browser (which later became the Mozilla project), and the group thought that the event was a precious window of opportunity for them to convince the corporate world of the superiority of an open development process.
The term that existed at the time that was used to denote this open development process that they were advocating was of course Free Software, which had been coined by the earlier Free Software Foundation and GNU Project. They felt, however, that the term 'Free software' emphasized a political ideology far too much and had a confrontational attitude that would probably cause most businesses to shy away from it, so they decided to coin a new term for it, and come up with strategies that would emphasize the effectivity of the open approach to software development as opposed to the ideology it represented. Chris Peterson thought of the name 'open source', and the rest of them decided that was the best they could come up with.
They began to spread the word afterwards, and people such as Linus Torvalds and Bruce Perens gave their enthusiastic support, with Perens offering to trademark the term and providing hosting for the opensource.org website. Richard M. Stallman of the FSF initially thought of adopting the term as well, however he changed his mind and stuck to the term Free Software instead, for reasons that will be explained below. Raymond also promptly changes the text of his seminal work 'The Cathedral and the Bazaar' to read 'open source' where it used to say 'free software'. The official Netscape press release announcing the Mozilla Project on February 23 used the term 'open source', and soon after the term began appearing in trade publications, mostly with positive spin.
Soon after, around October 31, confidential memoranda from within Microsoft were leaked that detailed the giant corporation's internal analysis of this 'upstart' movement, the infamous Halloween Documents as they came to be known, and Steve Ballmer himself admitted that yes, they're worried about all of this, as it's not only diametrically opposed to their approach to software but positively inimical to it. Other large corporations such as IBM, HP, and SGI have on the other hand given enthusiastic support, with IBM even going as far as investing billions of dollars in Linux and other open source development in the coming years.
The adoption of the term Open Source Software (OSS) in lieu of the term Free Software (FS) has led to a 'schism' within the group of advocates of open software development. This is occasionally erroneously thought of in the same way as the factionalism that often erupted in radical movements of the 1960's, disagreements occur due to details of strategy (the praxis as it were), a split occurs and the factions that result begin treating each other like enemies. The opposite is true however with the OSS and FS movements: their use of different terminology has resulted in a different philosophy, value system, and a different set of basic principles.
Nonetheless the OSS and FS camps both agree on the same fundamentals with regards to software and its licensing, so perhaps in another sense OSS and FS actually do refer to the same thing. They both believe that:
- Software should be freely redistributable. The license for it should not prevent any party from selling or redistributing the software.
- The program must include source code, either the source must be distributed along with any binary, or obtainable from a well-publicized location.
- Licenses for the source must permit arbitrary modification for any purpose, and grant the right to redistribute such changes.
- If the software has been modified by someone, it should be made clear that it has been modified and who has done the modifications, if they are redistributed.
- Software licenses should not discriminate against any individuals or groups of individuals or specific fields of endeavor, e.g. saying that a software package is 'free for non-commercial use' is totally unacceptable.
- The license must also apply to anyone to whom the software has been distributed, and should not be dependent on where the software has been obtained (i.e. a program cannot have different licenses if it were obtained standalone and obtained as part of a collection of software). It should also not attempt to influence the licensing of other packages that have been distributed along with it.**
Their agreement on these important matters has allowed them to coexist peacefully and even cooperate on projects. Both the OSS and FS camp have used these general principles to evaluate various software licenses, and they almost always agree on whether a license is acceptable, with some exceptions (most notably the APSL, which OSS accepts but FS rejects), that seem to reflect their differences in principle.
However, the OSS camp has tried to focus more on the practical benefits this approach to software development gives, the rapid and efficient pace of coding and testing, the ability to collect expertise from communities of hackers all over the world, and so forth. They tout the strong reliability and stability of open source software compared to the fragile and crash-prone monstrosities of proprietary software, of which Microsoft software is the most often given example. This practical approach has been responsible for the success of the movement in encouraging the spread and use of open source among large corporations.
The FS camp on the other hand has consistently sought to emphasize the freedom that this approach to software development gives, and they believe in the principles of software given above as inalienable rights everyone should have, and should be valued for their own sake, over and above the convenience it gives. This view is considered by the OSS camp as being 'too extreme', and they feel that overemphasizing it is counterproductive to the cause, though many of them value these principles at least as much as the adherents of FS. The OSS camp merely chooses not to emphasize it too much.
* See the Free software and open source software nodes for times earlier than this.
** The GNU General Public License fulfills this requirement, as it only influences other programs that specifically take GPLed code to form a larger work.