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The idea of the distributed code, which could be modified, changed, and used for anyone’s purpose came in the 1980s to Richard Stallman, a software engineer from the Massachusetts Institute of Technology. The code he gave away for free was under the Stallman’s license called the General Public License (GNU). By giving away a free code, Stallman believed that the other software engineers could use it, learn it, and do great innovative things on its basis. And, closer to the 2000s, an Open Source Initiative (OSI) was established. The OSI is the open software repository that offers certain rules and guidelines according to the usage of the open-source software, including information about licensing, support, and community collaboration.
You can trace back the history of the open-source creation, read about the OSI more, but technology went further and the most brilliant minds started making money in open source with the help of the open-source software business models.
If you are
this article is just for you! We will provide answers to make you understand what open-source software is, how does it work, what its benefits are, and how does open-source software make money? Let’s go!
An Open Source Software or OSS has a source code, which is open to changing, modifying, and distributing as the access to it is open and free of charge. A source code is the fundament of an application, its architecture, features, and functions. You do not normally see it unless you’re a software engineer, who works with the code.
According to a source, Mozilla Firefox, Google Chromium, Android, LibreOffice, and the VLC media player are the best examples of open-source software.
Open-source software development and distribution belong to the software development business models. What is the purpose of the source code to be accessible in the open software? Most of all, to ensure code transparency and to allow the developer and customer ecosystem to learn and with the help of obtained knowledge drive positive innovations. And, second, to receive revenue. The projected revenue of the open-source software services in 2022 will reach more than $30 billion.
What are the benefits of free and open-source software? Taking advantage of its availability it is possible to:
That’s why most software developers find the source code openness convenient and practical in their daily job.
But, let’s dig deeper and try to understand, how does the OSS development model work, where is the open-source code located and what is the open-source business model or models companies use these days.
The code, which is an open-source one, is located in a public repository like GitHub and can be used or shared openly. What’s more, developers can even contribute to this source code by suggesting design and functionality improvements. If software engineers know how to enhance the source code and find it useful to create their basic application – the repository is a good place to start from.
To make OSS available to anyone, it has open-source licenses with terms and conditions defined. According to a license, developers can use the source code, study it, modify it, and distribute it. The GNU license speaks about the free source code of the open-source service. But, there are other licenses of the open-source companies that require fees.
Changes made to the open-source code require a written explanation of what exactly was altered and with the help of what technological tools. The GNU license supports any modifications that were made to the initial source code and approves it to be hosted at the companies’ websites and paid for. And, this is how most software development providers use their OSS to gain monetary rewards.
Open-source software development processes have several phases. For example, the source defines 4 main steps to initiate the source code development. These are:
How to work on open source projects? To start a successful project, investigate the software development market first. The process begins when you either adopt the existing project or start a new one. The new project starts with the Initiation phase. The existing project adoption starts from the Execution phase.
What are the ways open source companies can make money?
There are different ways companies can monetize open source building a profitable open-source business. For example, there are 3 ways to make money with open-source software:
Donations are a type of money-making that is mainly used by individual developers or small startups. Large corporations with big profits have no potential benefit of making money this way.
How do donations work? A developer or a startup produces an open-source project and makes it open to anyone interested. However, the contributor asks the open-source code users to donate any sum of money for further code development. GitHub, Patreon and Make A Coffee are the repository platforms that allow free of charge placement of the source code projects and an infinite number of code views. Anyone, who finds the code useful and takes it can donate the sum of his/her choice. With the help of donations, developers and startups can make a good profit. But, the drawback is that this business model is unstable. You cannot predict when someone will be generous enough to donate and the income will never be sustainable. There are people, who tend to use any convenient codebases and their updates with no intention to pay. The others try to support the project but cannot give out everything till the last penny. So, making money on OSS with donations can be the first step to payable software code usage, but not the ultimate.
The other way to receive costs is to allow others to store your software on their websites. How exactly? For instance, you have developed an OSS and would like to share it with the world. Businesses, who need your software can run it on their web servers. This is a free option. The only minus is that they will need to configure the open source project to their server to make it work. But if they need to run the app on your servers – this option is to be paid for.
This type of gaining profits is very popular but will not work for every OSS. Differentiating the paid and free versions of the software is great. But you have to remember that the cost of the paid version cannot be too high as developers might think that maintaining their servers will be a better choice here. You can make hosting software as easy as pie on your servers, but be careful with the price you set. Approach this method reasonably.
Dual licensing includes two types of payment for the OSS. A single developer using the source code will receive it for free as his/her purpose will be mostly to learn and create something useful. One software engineer is just too small to receive monetary rewards for his/her OSS usage. However, large companies using the core codebase will have to pay a licensing fee as their usage will result in profit gains. Some of the OSS companies offering dual-licensing are MySQL, Oracle Berkeley DB, Asterisk from Digium, and many more. If you plan to use the dual licensing model, look through what it offers to gain some insights.
What’s more, companies that use the source code can decide on the appropriateness of the licenses and choose the one that will suit them best. However, the choice should be based on integrity and result in legal compliance with the licensing rules. No company that has paid for the open-source code is allowed to make this code public.
This list is not limited to the three options and, this way, you can also make money with open source projects via paid extra features, certification, and support business models. Let’s discuss them further!
Mobile app monetization models to look out for!
Tailwind UI is an open-source CSS library that has been established back in 2017. However, today it has earned more than $2 million in profit. How open-source software makes money for its extra features? The creator of the open-source project dedicated every minute to its development and gave out the core code for free but the extra code components like the UI were charged for. The framework to build software and its main features are totally free, but if you need extra features then get to see the price list. How is it an advantage for developers? Buying the already existing components allows not to waste time and support the OSS project. How is it beneficial for businesses? They obtain cost for giving extra software features these companies need.
This profit-gaining model is suitable if your core users are large enterprises, which need extra features in a software product. For instance, specific integrations (payment systems, etc.) user management possibilities, SAML Authentication, and others. Here, you can charge them for every extra feature because they will still need these and will lack time to deploy features on their own. Companies of medium or small sizes and startups are highly unlikely to need extra features.
The open-source developers worldwide really lack training, and 54% of open source professionals were disappointed with this tendency in 2020. Based on the need for open source software support worldwide, it is always a good choice to produce video courses and teach potential OSS users how to manage and maintain the software themselves. Of course, this can be done at a reasonable price. What is an open-source operating system that produced numerous training courses to give developers the basic info on how to manage open-source software and to make money with open-source software? It’s Linux. There are courses free of charge and paid ones, which makes Linux Foundation receive certain costs to their budget if developers choose the paid versions of training courses and want to obtain certificates in the future.
Creating paid support for the OSS is a model of money gaining produced by Red Hat. How to make money from open-source software support? Here, the open-source software has to be paid for to be supported by the creators and configured. If you’re a business that needs to resolve some issues concerning the OSS or maintain and manage it – choose the support contract offered by the software distributors. It is always a better idea to ask the OSS creators to manage and maintain their software than to do it yourself. Here, the costs of self-management will be higher. If this way the costs assume to be bigger than the benefits, the software loses its accessibility and becomes unavailable to the masses.
Choose what is better for you: in-house vs outsourcing software development
To wrap up how open source software makes money, there are multiple ways to do it. For example, through asking to make donations to support your code development, to make licensing on usage, change, and distribution of your open source projects, to allow hosting the OSS, to make extra paid features for the OSS, to provide paid support and sell training courses of OSS management. All these types have to be adjusted to your business needs and possibilities. If you need a piece of expert advice we recommend you to try our product discovery service and receive the most efficient opinion on open source software development. We can also provide web development and mobile development services and custom software development services for startups Don’t hesitate and find out all the answers today!