This document discusses how open source enables open innovation in software. Open innovation utilizes both internal and external ideas and paths to market to advance technology. Open source provides meritocratic communities, open processes, open code, and crowdsourcing which can drive innovation. Feedback is critical for innovation and open source allows for fast feedback from a large community through tools like issue trackers, source control, mailing lists, and wikis. Concrete examples from Day Software, which used open source components and communities, are provided to illustrate open innovation through open source.