The basics behind the $7.5 billion acquisition.

Today, Microsoft announced it is acquiring the company GitHub for $7.5 billion.

If you're at all plugged into the broader world of tech, you've no doubt heard of both companies. But unless you're a developer yourself, you probably haven't had much experience with GitHub itself. So what is it, and why would Microsoft want to buy it?

GitHub, Explained

In simple terms, GitHub is a website and service that allows software developers to store their code in a centralized location and offers tools that let coders from all over the world make changes to that code without overwriting each other by accident. Better yet, all these features available free of charge, with one condition: You have to make your code visible to the public, also known as open source.

As is the case with digital copies of movies and books, it is functionally free to create infinite copies of software. But many developers and companies are set up to make their money by selling the finished product they create, so it's crucial for them to keep their code—the recipe that anyone with some basic know-how can use to make a copy of finished product—on lockdown. Every person who downloads a program for free, but would have paid for it otherwise, is a missed moneymaking opportunity.

Open-source software flies in the face of this business model, because once your code is public, you can't stop anyone from snagging it and building a copy for free. You protect it legallyGitHub supports a number of licenses that allow developers to set limitations to how their literal code is used. Owners can prohibit things like commercial use, or require programs that use their code be shared in a similar way. None of this, however, prevents people from learning from your code and writing their own versions, or ripping it off entirely. For that, you'd have to keep your source code private. GitHub will let you do that as well, but only if you pay a fee.

This presents developers, particularly those without much in the way of a budget, with an interesting choice. By going open source, they can use GitHub for free. What's more, GitHub allows anyone in the world to submit changes and fixes to your public code. You don't have to accept the changes if you don't want, but it's possible that a stranger from around the world might spot a bug that you didn't, or even add a feature because they have use for it themselves. The downside is that you lose control of your software. No matter what rules you put in place, someone could go whip up a copy.

However, selling software is only one way to make money—and arguably a bad one, since it relies on making your end product artificially scarce and puts you in an arms race with pirates. GitHub, for its part, makes money in a handful of other ways. It hosts a job board where companies must pay to post, and sells access collaboration tools that not everyone will need. There's also the privacy tax—the price GitHub extracts from developers who want to use its tools but won't or can't go the open source route. Instead of selling a thing, it charges for services it is uniquely positioned to provide given its prominence and popularity as a platform.

Why Does Microsoft Want It?

Historically, Microsoft has represented the antithesis of the open-source idea. Copies of Windows have long been a cash cow for the multi-billion-dollar company. Bill Gates took a hard stance against an open-source model of computing way back in 1976, when his "Open Letter to Hobbyists" enumerated all the ways in which a culture of sharing and piracy in the early hobbyist computer scene would ultimately hold things back.

In the decades since, the shape of the computing world has changed considerably. So has Microsoft. With Windows 10, the company has pretty much moved away from charging for its flagship software, in part due to pressure from Apple's move to make OS X updates free, and the smaller but constant pressure of free and open-source alternatives like Linux which have been leveraged against the software giant in various ways. At the same time, the cloud has become more crucial than ever. A giant portion of things you do on your computer don't actually happen inside the box on your desk; they happen on someone else's servers miles and miles away.

As its ability to sell Windows disappears, and as Windows 10 turns into a constantly-updated Forever OS instead of a stepping stone towards some 'Windows 11' that it intends to sell, Microsoft has more of an incentive than ever to toy with open-source experiments. And it's been doing so for a while, cozying up to developers who work on open-source software and trying to make it easy for them to use Microsoft's cloud infrastructure, Azure. In a way, this transition reflects a move towards what companies like GitHub already do—making its actual software free, and running its business on the services it can provide once Windows gets people in the door. There are even rumors that Windows itself may ultimately go open source.

It's impossible to predict exactly what Microsoft will do with GitHub proper, and plenty of developers are more than a little apprehensive about the acquisition for that reason. But if Microsoft's previous purchases of Minecraft and LinkedIn (remember?) are any indication, then the company is not likely to do anything drastic that will ruin things for people who already use it. In both cases, Microsoft has seemed quite content to let both exist mostly unchanged, while bolting on some features designed to bring people into the Microsoft fold.

Minecraft (which Microsoft still allows to exist on Sony's PS4 which competes with its own Xbox One) got a new, optimized version that runs on Windows 10. LinkedIn has been officially integrated into Microsoft's subscription Office 365 products. With GitHub, it seems more than likely that Microsoft's first order of business will be to connect this overwhelmingly popular platform to its overwhelmingly popular development suite Visual Studio, to gently and subtly nudge more and more people under Microsoft's growing umbrella.

Microsoft is turning its acquisitions into onramps to its broader ecosystem of services, a sort of unwalled garden. The biggest question left on the table is how far into open source world Microsoft is willing to go.