Open source is no longer associated just with low cost. In fact, if one looks at the world of Linux and open-source closely enough, one would discover creative and profitable ways of having an active and feasible enough revenue stream, which further fuels development and innovation in the area. At the crux of open-source development, is the mix for the particular market, which would cater to the precise needs, and in turn, give the open source revenue income. The biggest example in this case is that of office application developers, made and controlled by a few companies, which is an incredibly profitable venture.
Donations where ROI not expected
Many of the existing open source models began work as a solution for a small closed group of users, who were looking to cater to their own personal needs. Later on, seeing the benefits of the solution at heart, they have released the code as open-source, which can be altered and manipulated as per preference. This is also a method for accumulating free developmental resources of coding experts, who can be later be invested into revenue generating business ventures.
However, those can often be based on donations to meet operational expenses of the projects. Like for various Linux-based projects, where one can download various Linux distros, usually an open offer for donation is left on the site, whereby users can donate as per their capacity to the project directly. Obviously, the rate of returns and investments are not guaranteed.
Freemium and Community based projects
Many a times, the company or team simply create a product and release into the market, as an open source code. In this case, they do not invest resources for any support to customers of the product. It becomes a community’s call to take, for providing support after customers have started using the product. However, since there will always be a need for advanced features, installations, up-gradation from time to time, companies usually use it as an option for generating revenue.
For providing premium features, maintenance, or installation and general support, companies charge a particular fee, and also use it to cross-sell or up-sell other products, thus bringing in revenue. In fact, the ‘Freemium’ model is virtually the same thing, where the core product is free, but the add-on features and upgrades are chargable, which brings in revenue for the maker/producer of the product. This could also bring in SaaS based revenue models, where advanced software brings in revenue, while a community exists for free open-source use. Examples include Canonical which creates the popular OS Ubuntu and it’s variants, and Odoo which makes OpenERP.
The Add-on business
The Add-on business model, is largely similar to what was earlier suggested. Many companies like WooCommerce, create a core free open-source product, but use it as a platform for gathering users, and later convert them into an active revenue gathering base for selling other products and service.
Using the example of WooCommerce, the company managed to gather a large user base from it’s free plug-in product for WordPress, which added a lot of value for Automattic, which acquired Woo in 2015, for $30 million. Along with the innovations created by 55 employees of WooCommerce, Automattic gained a user base, which they could later use for selling hosting services, which is their add-on or core business.
With the advent of open-source and the way software and other products can be distributed, the traditional model of physically going to retail stores, and buying disks for the same, are steadily on the decline. In fact Microsoft, though not open-source, stands as a prime example. A lot of users could pay and buy Windows 10 online, instead of having to buy from retail stores separately. However, even this is something which the open-source world could use, to build loyal customers, and maintain a competitive and profitable user base over time.