tl;dr
☁️ Cloud hosting: helping host/deploy premium cloud-hosted services
🤝 Consulting: support and services
💄 Complementary products: selling proprietary extensions
🫵 Talent attraction: securing top-notch developers
👯♀️ Partnership opportunities: businesses come to you
Hey friends 👋
Open source projects can seem counter-intuitive to traditional business models where intellectual property is fiercely protected and monetised.
Indeed, open source's very ethos of freedom, transparency, and accessibility is the very reason why we created quira.sh (we help devs find open source projects to contribute to).
Interestingly enough companies may not directly monetise their open source projects, but there are ways they can still benefit financially. So, how do they do it? 🌟
Now, here are the main ways companies can financially benefit from open source:
☁️ Cloud hosting
All companies have their core product available as an OSS project for free, but it can be a real pain to deploy and maintain. As a result, people may want to pay them to do this "painful" aspect. This is one of the most common approaches to monetise OSS.
Example: Metabase offers a premium cloud-hosted version of its open-source business intelligence tool, generating revenue by providing enhanced features and support.
🤝 Consulting
Companies can offer support and services around their open-source projects, such as support, training, and custom development. This can generate revenue while also providing additional value to customers.
Example: Red Hat, Inc. provides subscriptions for support and training services related to their open-source operating system, Red Hat Enterprise Linux, generating significant revenue.
Note: The two aspects mentioned above are the primary ways open-source companies can make money. However, there are indirect way companies can still generate some revenue. Let's look at them together. 👀
💄 Complementary Products
Companies can develop proprietary products that complement their open-source offerings. This can enable them to monetise their intellectual property while still contributing to the open-source community.
Example: Elastic.co offers proprietary features such as security, alerting, and machine learning capabilities on top of their open-source search and analytics engine, Elasticsearch.
👯♀️ Partnership Opportunities
By contributing to open source, companies can establish partnerships with other organisations in the ecosystem, leading to new business opportunities and revenue streams.
Example: Microsoft's contributions to open source, such as the Visual Studio Code editor, have helped it form partnerships with a wide array of tech companies.
🫵 Talent Attraction
Companies can attract top engineering talent by offering the opportunity to work with cutting-edge open-source technologies, strengthening their engineering team and driving innovation across their technology stack.
Although this may not sound like a making money aspect, this can allow tech companies to save on the often significant budgets that are allocated to talent acquisition. Also, great developers have a very significant impact on companies' bottom line. 💰
Example: Facebook's creation of React, an open-source JavaScript library, has not only gained popularity among developers but also helped the company attract great engineers.
All in all, companies with open-source software can rely on consulting services and help in cloud hosting/deploying to generate extra cash. There are some additional ways companies can bring in revenue but these are not as direct (complimentary products, talent acquisition and partnerships).
So next time someone asks you: "Do companies in OS even make money?!", you can drop some knowledge on them. 💅
I hope you enjoyed this article and that it brought you some value. 🚀
If you're looking for a platform to discover open-source projects aligned with your interests, language preference, and do it, whilst not spending a penny, visit quira.sh 🫶.
Top comments (8)
Super nice summary. 🙏 to OSS companies everywhere!
We will look in another article why companies are incentivised from the first place to create open source repos (so non-financial based incentives). Keep your eyes on the look out - I hope you will like it! 🫶
Good notes.
In addition, the OSS companies still may sell licenses. For example, Qt is doing so.
Thanks a lot Artak! This is a very good point that OSS companies may sell licenses as well. Thanks for the comment 🙌
Nice article.
Thanks a lot Windya!
My pleasure Abhi - glad you enjoyed it ⚡️