Open Source and Revenue

This is the second part in a series on open source software. In the first part, we examined why equating open source with “just” free is fool’s errand. In this post, we will explore the different avenues for revenue from open source software.

The first one is pretty straight forward – charge for support, maintenance, consulting, and custom development. Software takes an effort to understand and maintain. Either you can do it in-house or outsource it to an external firm. Big enterprises have specific needs which require custom enhancements. They also need consistent support and suggestions. There are a lot of companies which have used this model to generate revenue from open source software like Redhat, Percona, etc.

The SAAS option for open source software has gained immense traction in the last decade or so especially since the advent of cloud. Instead of you taking the pain to host and maintain, the company behind the software deploys and manages it for a recurring fee. Most of the popular open source software is available under this model nowadays. WordPress, MongoDB, ElasticSearch are some prime examples of this strategy.

Another revenue strategy is the open core model. The core is open and free, but features which enterprises need like security, high availability and user management are part of the commercial offering. For example, the core database could be open, but clustering and high availability might be available only in the retail version. InfluxDB uses this model.

Then there is the licensing play. Software licensing is nuanced and comes with a lot of baggage and restrictions. The open source version of the software is released under a restrictive and commercial antagonistic license. If you want to use the software in a business setting, you have the option of buying a more permissive and commercial friendly license; this is very prevalent in software bundled in commercial products.

It is not uncommon for a company to use a mixture of the above strategies.

In the next part of the series, we will go through some recent developments in the open source world in an attempt to ward off the threat from big cloud providers like AWS.

Image Credit: lucas Favre