Yes, You Can Make Money with Open Source

Open source technology is everywhere. It's in your phone, your laptop, and it may run even the website where you're reading this article. Thousands of companies have placed open source software at the center of their business. But how do they make money from something being given away for free?

Red Hat is the global leader in open source software solutions — and has a clear strategy in how to generate revenue. They package the popular open source operating system Linux as Red Hat Enterprise Linux and deliver it to enterprises with a promise of 10 years of support. Open source projects like Linux can literally change every day, so that's a tall order.

"The functionality is a very small part of what companies are buying when they buy software," says Red Hat CEO and president Jim Whitehurst in a phone interview. "We make the power of the open source development model consumable for the enterprise in the way they're used to consuming software. We have engineering teams that track every single change — a bug fix, security enhancement, or whatever — made to Linux, and ensure our customers' mission-critical systems remain up-to-date and stable."

Paid support is one of the most common sources of revenue. This usually takes the form of an annual service contract but can also be available á la carte. Providers typically offer a tiered model, based on the number and urgency of requests. At the top end, a company may put dedicated, full-time staff on-site in their customer's office.

Companies also package more substantial (and expensive) professional services with open source software. Often a customer needs help implementing the open source tech or may need help customizing it for their particular needs. They'll pay to ensure it's expertly installed and maintained. Other professional services may include quality assurance and training.

Why do companies pay for open source software support? Executives often feel more comfortable when they're paying for something instead of getting it for free. They're not buying the code base, but they are buying speedy responses to support queries, adherence to industry and regulatory standards, and so forth. In short, they're buying assurance that someone will be accountable for their technical problems when they arise.

But there are other successful strategies. ActiveState licenses their software by selling their language distributions, commercial versions of popular open source programming languages like Perl, Python, and Tcl. Perl and Python are especially attractive because they're highly regarded and ubiquitous — many developers know how to work with them and like using them. ActiveState takes garden-variety Perl, Python, and Tcl and supercharges them. They guarantee quality-tested versions of the code; they manage complex licensing issues that come into play when you include open source software in other products; they maintain the code for you (remember, open source changes over time); and they provide on-demand technical support. These advanced versions of open source come at a price.

And just because they've released a version of their software under an open source license doesn't mean that they can't augment it, make significant improvements, and then sell it under a more restricted license. For example, WordPress Enterprise is a souped-up version of the popular garden-variety content management platform. Enterprise customers not only pay for reliable hosting and support, but also for customization features unavailable in the basic product.

Using these companies and strategies as a guide, you can determine if your business will be able to make money with open source. Consider these points:

  • If customers already pay for your expertise, then augmenting your offering with open source can work. For instance, when businesses choose Drupal as their web solution, they get the popular publishing platform for free. But they'll pay good money for a developer like Acquia to build a custom Drupal theme, implement better security, and upgrade the open source platform as newer versions become available.
  • For many businesses, the decision to go open source is a way to remove all barriers to adoption. If your business needs mass adoption to succeed, then open source can be an effective way to get your product into more peoples' hands. Just be sure you've got corresponding, valuable services or complementary products at the ready to monetize.
  • Often companies will pair open source technologies with paid solutions. In Mobify's case, we give away the tools and materials so users can build their own mobile websites, and we make money when they launch those websites on our platform.

Whether they know it or not, businesses and consumers use open source software every day. While the premise of giving away your product may seem counterintuitive, there's abundant proof that it can be a solid strategy for business success.

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