With closed-source software (or Proprietary software), the developers sell licenses to use the software, whereas with open-source software, developers make the source code available for anyone to use, modify, and distribute. This is one of the critical differences between closed-source and open-source software.
How do Open Source Sofftware vendors make money if they’re giving away their software for free?
There are a few different ways that open-source software vendors make money. Below are the most common ones.
1) Support and Service
Many OSS vendors make most of their revenue from support and service. Customers who use open-source software often need help setting it up, configuring it for their specific needs, and troubleshooting any problems. As a result, these companies charge for access to customer support and services. In addition, some vendors offer premium versions of their products that include additional features and support. By providing a mix of free and paid products, these companies can generate revenue while still providing users with a high degree of flexibility.
2) Dual Licensing
With dual licensing, the vendor offers two different licenses for the software. One is a closed-source license, and the other is an open-source license. The open-source license is usually free to use. But if you want to use the closed-source version, which usually comes with additional support or functionality, you have to pay a fee.
One well known example of open core dual licensing is Oracle’s MySQL database management system, which is dual licensed under a proprietary licence and the GNU General Public License. The open source version is the core offering, while proprietary versions are available that offer additional functionality and enterprise support.
In addition, a proprietary version may be offered for rent, as wel as depending on the volume of use.
3) Open core and paid additional modules
Some vendors allow users to use the software for free, but charge for extra features or services. This approach has several advantages.
First, it enables users to get started with the software without making a financial commitment upfront.
Second, it gives vendors a way to monetise their user base by offering paid extras that provide additional value.
Finally, it gives an incentive for users to stay engaged with the software and keep using it over time. Paid extras can take many different forms, such as priority updates, access to exclusive features, and more.
4) Certification Fees
In this monetisation model, users get certified in using the software. The vendor may also offer training courses.
Vendors may also franchise out their software. In this model, open source software providers garner a network of commercial partners, who pay to become certified and therefore use the provider’s name and logo. These partners then provide a proportion of revenue to the open source developer.
Example, please visit Linux Foundation Training and Certification.
Vendors also make money from open-source software through donations or crowdfunding. This is usually done through a website link to a payment processor where users can donate money to the developers. The amount of money donated varies depending on the project and the donor.
Another option is crowdsourcing — i.e., the practice of assigning software development tasks such as design, documentation, coding, or testing to members of the general public as a means to improve the software, and therefore stimulate other organisations to sponsor the further development of the project, or separate similar projects that can be monetised.
Open source developers may partner with funding organisations from the outset. The organisations support the development of open source software via grants and stipends.
If you want to grow your open source software and make it more accessible to enterprises, you can sell educational content like trainings and workshops, example, please visit Linux Foundation Training and Certification.
8) Hosting of Open source Soultion
or Model Hosted vs. Self-Hosted
With this option, you offer users the option to either host your product on their own servers or host it on yours. The value prop is similar to that of the support model: companies don’t want the hassle of hosting your product themselves and are willing to pay you for it. The benefit here is that you only have to maintain one edition of your product, which makes it easier and more financially feasible to plan your roadmap and hire a smaller team.
The downside of the hosted model is that it’s not very defensible. You’ll likely face competition from hosting providers who simply host your free edition and charge their users for extra value-adds, cutting you out of the deal completely.
The hosting business model is also much harder to pull off without a solid, popular product. MongoDB and Sentry are two examples of products that lets you self-host or host with a 3rd party provider.