How Do Open Source Companies Make Money?

Published: 4 weeks ago

Have you ever stumbled upon a piece of open-source software and wondered how it exists if it is free and available to everyone? Do you use open source software for your own business or ventures and want to learn more about how it operates and remains updated? Understanding open source software and open source business models can help you to get a better idea of how open source solutions work in real-world applications. 

What is an Open Source Company?

An open source company is a company that primarily focuses on delivering open source software, products, and services. When a piece of software is considered open source, the source code of the software's engine and all of its functions are readily accessible to anyone who chooses to use it. This means that anyone accessing the open source code has the ability to edit and re-work the code to fit their own needs, thus helping the software's functionality and features to continuously evolve.

Examples of an Open Source Company

One of the most well-known open source companies that represents WordPress, one of the largest open source CMS (content management systems), is known as Automattic. Automattic is the parent company of WordPress and has since gone on to develop more for-profit and closed-source software solutions since the success of WordPress.

What is the Appeal of an Open Source Company?

An open-source company is appealing to programmers, entrepreneurs, and creatives alike. With an open source solution such as WordPress, crafting a vision and turning it into a digital reality becomes a much greater possibility. An open source software allows programmers the ability to edit, change, update, and remove coding that is not relevant to them or the needs of their project. With an open source piece of software, adding features, new functionality, and plugins is also much easier, as the code is flexible and receptive to changes and updates.  

For those who prefer maintaining control over the type of content, presence, or image they have online, using an open-source solution is often best.

tilt-shift photography of HTML codes

Are All Open Source Solutions Free?

While most open source projects and software are free to download, use, share, and even redistribute, it is important to research each open source solution you are interested in using prior to moving forward. Although many open source programs are free and accessible to all, some require various levels of licensing or a one-time payment in order to access and utilize the open source code(s) yourself.

Even if you stumble upon an open source solution for your own website or business, you may be required to use the software as open source, depending on the creator of the original open source software or platform. 

How Can Open Source Companies Make Money?

You may be asking yourself "If open source companies typically provide their programs and software solutions for free, how can they remain in operation while making money?" There are many different ways an open source company may begin to make money and generate revenue, depending on the goals of the creator of the open source project as well as the following or support the project has garnered itself.

For many programmers involved in the open source movement, monetary gain is not the ultimate goal. While many people are motivated by financial gain, programmers involved with the open source community are generally more focused on pinpointing and resolving issues as they pertain to the internet and with a variety of online tools. Rather than focusing on earning money, programmers who enjoy supporting open-source companies prefer building a reputation for themselves and their abilities when it comes to helping others. 

Although the motivation behind open-source companies may not be to generate maximum profit, there are still many different ways that an open-source company can go about earning revenue or generating income from the support they receive.

Requesting individuals to pay for open source code is not very common, but it is possible. Some companies such as Red Hat currently allow for paid support contracts, which help to sustain the business model and keep the programmers in business. Requesting that individuals pay a set amount in order to gain access to your open source code is possible, but it does not always garner support or a massive following.

Pros and Cons of Requesting Paid Support

Requesting paid support or a one-time payment for access to an open source project or piece of code is one way to generate revenue. While you will instantly begin to see ROI by requiring paid support from your open source company, there are many potential downsides and drawbacks that may keep you from reaching your true potential with the open source software or solution you offer.

Requiring any form of payment for open source software is possible, but it is often looked down upon and not always accepted by the open source community. Because the idea of an open source project is to provide as much information and coding to the public as possible, a paid business model does not always mesh well with those who are adamant about the message and objective of the open source community. 

Before choosing to go the route of requiring payment to access open source projects, it is imperative to consider the target audience you intend to reach as well as who might be purchasing access to your project and/or software in the future.

Donations and Voluntary Support

One of the most popular methods of earning money as an open source company or programmer is to simply ask for and rely on both donations and ongoing voluntary support or subscriptions. Asking for donations is possible within newsletters, on social media, and even within the official website of the open source software or service itself.

Donations are typically requested via PayPal or Patreon, and can be an excellent source of support for those who are dedicating their time and effort to updating and maintaining open source coding and projects over time. The more popular and common platforms used to request donations or voluntary support for those with open-source coding projects and/or applications include:

  • Patreon
  • PayPal
  • GitHub
  • Buy Me a Coffee

Pros and Cons of Donations and Voluntary Support

One of the biggest appeals of a donation button is that it is unassuming, which is optimal for those who have entered the open source market with little to no intention of generating a profit. With a donation button, there is no guaranteed source of income or stream of revenue, which is risky for those who are relying on their open-source project to pay the bills.

If you have a massive following with a strong sense of community, a donation button for voluntary support can work, especially if you are not reliant on donations in order to maintain your own way of life. If you are seeking ways to earn a living from open source coding and programming, donations and voluntary support may not be the right method for you to earn money. 

Dual Licensing Options

Open-source companies can also turn a profit by offering multiple licensing options. If you have an open source piece of software that you intend to offer to creators and individuals free of charge, it is still possible to charge a dual licensing fee for corporations and larger businesses or enterprises interested in utilizing your code. 

When using dual licensing options, you also have the opportunity to provide different perks and benefits for those who are willing to pay the fee to access the code, such as white label solutions or customized solutions.

Pros and Cons of Dual Licensing Options

Opting to offer dual licensing options is a great way to generate a side income, especially if your open-source company is targeting other businesses and larger enterprise clientele. However, if you are mostly targeting individuals who are seeking open source software that is free, you may not find yourself as successful when it comes to licensing paid options to clients.

Dual licensing options are optimal for those who are uninterested in maximizing profits, but for those who have a genuine following of larger businesses and corporations in need of additional software and/or solutions for their own companies and projects. 

Offering Hosted Solutions

Many open source companies not only offer a free version of the open source software they produce and share, but they also offer paid hosted solutions. For individuals who are unfamiliar with coding, programming, or web hosting themselves, this option is an ideal and often cost-effective solution.

Open source companies that offer hosted solutions do so by providing their open source code free of charge for all individuals who opt to install and use the code on their own server or with their own web host.

For those who are in need of assistance or are looking for a quick way to set up their open-source code project, choosing a hosted solution and paying a monthly fee may be more suitable, depending on the individual.

Pros and Cons of Offering Hosted Solutions

Offering a hosted solution is a way to generate income while also expanding on the type of business model you already have in place as an open-source company. When you begin charging for hosting solutions, you can quickly begin creating an ongoing revenue stream for your business.

However, it is important to understand all of the undertakings and responsibilities involved in offering web hosting packages and hosted solutions for open source software. You will require a server manager as well as a web manager in many cases to help with maintaining accounts and websites while ensuring your server downtime is kept to a minimum.

It is only advisable to begin offering paid hosted solutions once you are familiar with all aspects of owning and operating a hosting service on its own. Once you are well-versed in web hosting, you can then offer paid hosting solutions for those who are interested in getting your open source software up and running in less time. 

One way to generate an income stream from your open-source company is to do so by offering both paid courses and training sessions. Paid courses can help newcomers to your open source code to better understand the purpose of your project, how to get started on their own, and even how to fully customize the open source code for their own website or project. 

Offering paid courses is highly recommended for those seeking a more automated solution when it comes to generating an income stream via an open source project or piece of software. Paid courses that are downloadable or that can be delivered via email automatically save time while allowing you to spend more time focusing on developing your open source project and improving its code. 

Another option to generate income from an open-source company is to offer live training sessions or guided webinar training sessions. Live training and webinar sessions can help others by providing them with more visual assistance while learning to understand your open source project, its purpose, as well as how to navigate its code.

Pros and Cons of Offering Paid Courses and Training

Offering paid courses and training provides open-source companies with new opportunities to generate an income without sacrificing the integrity of a free and open-source project. Open source training courses and paid programs help those who are new to the realm of open source or programming themselves to become more acquainted with their digital environments. 

Paid courses and training are optimal for anyone who is seriously interested in an open-source project and is committed to knowing the ins and outs of the programming for their own benefit of the benefit of their own venture. One downside of offering courses and training is the need for additional customer service, especially if you are manually hosting live training sessions and webinars for your audience.

Understanding the basic fundamentals of how open source companies operate can help you to find a model that is not only fitting for your open source project, but also for your intended audience and the demographics you want to reach. 

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