Open Source Business Model

Goals

To obtain information on funded businesses that have an open source business model as their core function. For each one provide an overview, history, funding, pricing, business model, and user base.

Early Findings

Five Open Source Business Models

  • Support -The support model, also known as the “RedHat” model, goes like this: sell deployment and integration services, production-oriented “insurance policies”, certified binaries, trainings, bug fixes, etc., to businesses deploying the project in production.
  • Hosting - Hosting means offering a fully-managed version of your project, so that when users want to try out the project, or even deploy it in production, they can spin up a remote server with the software in just a few clicks, and not have to worry about operating it in steady state
  • Restrictive licensing - The restrictive licensing model creates a legal reason for users of open-source software to pay. It does this by providing an open-source license with slightly onerous terms, such that anyone using the software in production is highly incentivized to strike a commercial deal with the vendor.
  • Open-core - Open-core has quickly emerged as the most popular way for open-source companies to make money. The idea behind open-core is that the majority of the code base is open-source, while a smaller percentage (targeted at production or enterprise users) is proprietary. The proprietary portion may be packaged into separate modules or services that interface with the open-source base, or could be distributed in a forked version of the open-source base.
  • Hybrid licensing- hybrid licensing takes the open-core approach but improves on it in a few key ways. What hybrid licensing does is intermingle open-source and proprietary software in the same repository, and then make the code for the entire repo available. That is, the entire repository is “open code” (or “source available”), just not all licensed under an OSI-approved open-source license. Users can choose to use a binary with just the open-source bits (available under an open-source license), or use a binary with both the open-source and proprietary bits (available under the proprietary license). The proprietary licensed binary often will have paid functionality that is off by default, but can be unlocked by purchasing a license key.

Open Source Companies

  • Attached is a spreadsheet of 30 open source companies with revenues over $100 million, along with funding, valuations, and some other relevant details.
  • Redhat and Mozilla are undoubtedly two of the longest enduring open source businesses and have both been successful. Tech Crunch also mentioned Cloudera/Hortonworks, MuleSoft, Elastic, MongoDB, HashiCorp, Confluent, Databricks, Kong, and Cockroach Labs as companies to keep an eye on as they are all successful, but in different stages in their development.

Considerations

  • To have open source as a core component of a business model can be tricky. DevOps recommends defining a business model that can stand on its own as a SaaS, then think about open source. Open source works best for a technology company when it’s adopted as a series of strategies and tactics that support an otherwise sound business model—not the other way around.
  • To truly benefit and reap the benefits of an open source model there must be community and it must be maintained.
  • Forbes states, "To succeed as an open source company, you must first be a good steward of open source. This means no freemium schemes or artificial restrictions, allowing open source and proprietary software competition, and removing barriers to contributing. "

Proposed next steps:

You need to be the project owner to select a next step.