How to Make Money from Open Source Software and Models

Open-source software (OSS) has changed the game for tech by making unique tools available for free to anyone who wants to use, modify, or share them. But this openness can raise a big question: how can developers and companies make money while keeping their software accessible? In this guide, we’ll walk through some effective ways to monetize OSS, share real-world examples, and break down the pros and cons of each method in a straightforward way.

Why Do Developers Make Open Source Software?

Before jumping into the money-making strategies, let’s discuss what drives developers to work on open-source projects. Most OSS projects don’t start with profit in mind; they’re often created to solve a problem, give back to the community, or learn something new. But when these projects become popular, they become essential tools for companies and individuals. To keep up with growing demand and stay relevant, OSS projects need resources—which is where sustainable revenue streams come in handy.

Proven Ways to Monetize Open Source

1. Donations and Crowdfunding

One of the simplest ways to support an open-source project is through donations. Platforms like GitHub Sponsors, Patreon, and Buy Me a Coffee make pitching easy for users who value the project. While donations aren’t usually reliable enough for a full-time income, they can help fund smaller projects with dedicated communities.

• Pros: Let developers maintain independence while getting support from the community.
• Cons: Donations can be hit-or-miss and rarely cover the costs of full-time development for large projects.

Example: Blender, the popular 3D modeling software, is a great example. Blender relies on donations from its community and some corporate sponsors, allowing it to stay free and open-source while backed by a solid support network.

2. Dual Licensing

With dual licensing, OSS companies offer free software under one license type (such as the GPL) but provide a paid, commercial license for businesses or advanced use. This way, individual users and small developers get free access, while companies looking for commercial support can buy a license.

• Pros: Keeps the software free for most users while generating business revenue.
• Cons: Clear communication is needed to prevent licensing misunderstandings and ensure compliance.

Example: MongoDB offers its database free under the SSPL, requiring cloud providers to open-source their code if they use MongoDB as a service. MongoDB provides a paid commercial license for businesses wanting to avoid these restrictions, generating revenue while supporting open-source access.

3. Open-Core Model

The open-core model keeps the software’s essential functions free and open while offering paid add-ons or premium features geared toward business users. It’s great for letting people “try before they buy,” and businesses can pay for the extras that make a difference at scale.

• Pros: Businesses get to try the software first, and many will eventually pay for the extras.
• Cons: Striking the right balance between free and paid features can be tricky—give too much away, and there’s no revenue; hold too much back, and users may look elsewhere.

Example: GitLab uses this model by offering a free version for primary use and premium versions with advanced CI/CD features, enhanced security, and scalability options for companies.

4. Software as a Service (SaaS)

Offering open-source software as a hosted service lets users sign up and start using the software without dealing with setup or maintenance. It’s a popular choice for complex OSS projects requiring ongoing management. With SaaS, users pay for the convenience of a ready-to-use, hosted version.

• Pros: Provides a recurring revenue stream and allows the software to scale without users needing to handle setup.
• Cons: Requires investment in cloud infrastructure and security. Maintaining uptime and user data security is critical.

Example: Supabase, an open-source Firebase alternative, offers a free version for self-hosting. For managed hosting, users can opt for a paid SaaS plan, which includes features like scaling and backups, allowing Supabase to earn revenue from businesses needing a hassle-free setup.

5. Paid Support, Services, and Training

OSS projects can earn money by offering paid support, consulting, and training. This is especially useful for complex software critical to business operations, where companies are often willing to pay for expert help to ensure smooth operation.

• Pros: Builds trust and reliability, especially with enterprise clients, while driving revenue.
• Cons: Requires a skilled support team and can be time-intensive, especially for complex software.

Example: Red Hat is famous for this approach. They provide their Linux distribution for free, but businesses pay for premium support, consulting, and training, making Red Hat a top open-source success story.

6. Certification Programs and Franchising

Certification programs train and validate professionals to use or teach OSS effectively. Companies that use the software can feel confident that certified individuals know what they’re doing, and OSS providers make money by charging for certification.

• Pros: Builds a network of certified pros and loyal brand advocates.
• Cons: Requires investment in training programs, and scaling can be challenging.

Example: The Linux Foundation offers certification programs for Linux and related OSS tools, generating revenue and adding credibility to the Linux ecosystem by ensuring certified professionals have solid skills.

7. Crowdsourcing and Paid Feature Requests

Some OSS projects rely on users to contribute code, fix bugs, or develop features. Using platforms that support bounties for bug fixes or specific features, projects can bring in extra funds directly from users or companies needing particular updates.

• Pros: Helps fund specific improvements without needing proprietary features.
• Cons: Managing requests and ensuring code quality can get tricky.

Example: Many GitHub projects offer bounties for bug fixes or new features, creating a community-driven way for users to improve software while financially rewarding contributors.

Choosing the Right License Matters

Choosing a suitable license is crucial for balancing accessibility and monetization. Here’s a quick breakdown:

• Permissive Licenses (like MIT or Apache 2.0): These licenses maximize adoption by allowing almost any use, but this can make monetizing difficult.
• Restrictive Licenses (like GPL or AGPL): Require derivative works to be open source, encouraging companies to buy a commercial license if they want to keep their code private.

Some OSS providers create custom licenses, such as the Business Source License (BSL), which is restrictive initially but reverts to a permissive license after a set period.

Layering Revenue Streams for Stability

Many open-source companies use a mix of these models to diversify their revenue. For instance, they might offer an open-core product with SaaS hosting and paid support. This multi-layered approach helps ensure they don’t rely too heavily on a single source of income.

Why Monetize Open Source?

1. More Resources for Development: Monetization supports ongoing improvements and keeps the software competitive.
2. Community Engagement: Paid models encourage an active relationship with users who may also contribute to the project.
3. Lower Marketing Costs: OSS often spreads through word-of-mouth and community use, reducing the need for heavy marketing.

Challenges of Making Money from Open Source

1. Balancing Free vs. Paid Users: Offering enough value for free without giving away too much is essential to drive revenue.
2. Community Perception: Users might feel skeptical about monetization efforts if they restrict access to core features.
3. High Expectations from Paying Users: Paid users expect top-notch support, security, and quality, which can increase costs.

Wrapping Up: Building Profitable Open-Source Alternatives

Making money from open-source software isn’t just possible; it’s increasingly common. With models like dual licensing, SaaS, open-core, and others, OSS projects can thrive without giving up their open nature. By finding the right mix of revenue streams, developers can create sustainable, successful OSS businesses, proving that “free software” and profitability can go hand in hand.

For developers planning an open-source project, starting with a monetization plan can set the stage for long-term success. Using the right blend of these strategies, open-source projects can thrive and grow in a competitive market, bridging the gap between free access and financial sustainability.