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Monetizing Open Source: The New Open Business Model

Adamou Boubacar Amadou

Table of Contents

For conservative technologists, this may seem strange at first or perhaps contrary to their philosophy.

Still, the opportunity to earn money from open source software is a powerful incentive that drives the success of both open source and proprietary software.

In fact, in my view, we are at the point today where open source is poised to become the primary economic model for software companies because of its ability to generate revenue.

Not only has the explosive growth of computing power made it possible for individuals and small teams to create (and potentially monetize) significant scale in software without having to go through tangled and expensive venture capital rounds.

But even large enterprises are beginning to realize that they can give away open source software as a way of generating valuable data and insights about their products and services.

Let's explore how Open Source software is changing the SaaS ecosystem

What is Monetized Open Source?

The world is moving from closed-source to open-source, from proprietary to open-source.

Open-source software is free and available for anyone to use.

But it's not always easy to get started with open-source projects. There are some great options out there, but you'll need to spend time learning how they work before you can build upon them and monetize.

Why Should You Consider Monetising Open Source Software?

The primary advantage of open-source software is that it's free (at least in theory).

You can download it, use it and modify it without paying a cent.

The only thing you could do to support the cause is to give back your improvements to the community by contributing them back upstream.

This way, everyone benefits from all the hard work done by others in the community who share their code for free.

This makes open source incredibly attractive for startups and small businesses, which often don't have enough money to invest in proprietary solutions nor the resources required for maintaining those solutions over time.

Open source projects are also beneficial for large companies because they reduce costs by allowing employees to work on custom solutions instead of having to buy them from external vendors (which usually comes with a hefty price tag).

Another benefit of using open source solutions is that there's less risk involved than with proprietary software because you can always switch to another solution if something goes wrong with your current one.

There are a few reasons why you should consider using open-source code:

Cost savings: Open-source code can be free or very inexpensive compared to proprietary software, which can cost thousands or even millions of dollars per license.

Flexibility: Open-source projects give creators and companies flexibility and lower platform risk. Monetization makes these efforts sustainable.

Platform risk puts you at the mercy of closed-source companies. You are subject to vendor lock-in and rent-seeking behaviour.

Monetized open-source projects give some or all of the code away for free. With the ability to change it. Projects are monetized via services, premium features, hosting etc...

What Are Some Examples Of Open Source Software?

V.L.C. Media Player

The VLC media player is an open-source, cross-platform multimedia player.  It can play files, formats, and codecs with ease.  The main feature of this software is to play almost any video file.  

It has a built-in codec pack so that you don't have to go through all the trouble of installing codecs separately on your device.

The VLC media player can play almost any type of audio or video file you throw at it — from a standard MP3 to a feature film, VLC plays all kinds of formats..

WordPress

WordPress is the most popular open-source CMS on the web, powering over 60 million websites. PHP-driven and backed by a strong community of developers, it’s an easy platform to get started with.

It's intuitive, user-friendly and easy to use for anyone with minimal technical experience.

Whether you're a business looking for an easy way to maintain your corporate website or a blogger who wants to set up their own personal blog, you can get your site up and running in no time with WordPress.

Ghost

Ghost is a powerful app for new media creators to publish, share, and grow a business around their content.

Ghost is a self-hosted alternative to WordPress that makes it easy to write and publish blogs.

It comes with modern tools to build a website and blog and is used by everyone from individual bloggers to large media companies.

Ghost is completely open source and built on top of Node.js. You can use all of the available integrations in the Marketplace or create your own using our API documentation.

How to Monetize Open Source Projects?

There are many ways to monetize open source projects. Here are some of the ways this could be done.

Selling Premium Package/ Support: This is the most common way to monetize an open-source project.

You can provide paid support for your project and make some profits out of it.

You can also make a paid version. You'll need to find the right pricing so users aren't incentivized to self-host and that you are able to justify the cost.

Many open source projects use this model, including WordPress, Ghost, MongoDB and Supabase.

Charge for Custom Development Work: If the open source is popular, you can charge customers to develop custom features. For example, if a company wants to use WordPress for their website but has it customized with specific features, they could pay you for the work.

Offer Paid Training Courses: If your open source project is popular, you can sell training courses on it. This is a great way for developers to learn how to use the software and earn money at the same time. You can create a training course and sell it to customers. Many developers have done this with their programming skills on Udemy and other platforms.

Sell a Proprietary Version of the Product: This could be an upgrade or a "premium" version of the software that offers more features and benefits than the original, free version.

Create an ecosystem of plugins and extensions that are sold on your website or through other channels like marketplaces like CodeCanyon and Envato.

You could also package up these extensions as an all-inclusive suite of tools, which could be sold as an alternative solution instead of or alongside the core platform — like Adobe Creative Cloud does with Photoshop CC vs InDesign CC vs Illustrator CC vs After Effects CC.

Key Takeaways

Monetizing open source helps create a more competitive marketplace.

Even though open sources can benefit from monetization, but the real beneficiaries are consumers and users.

Value creation is a necessary but not sufficient condition for value capturing.

Companies must understand the value they create and how to capture it if they want to succeed.

The software industry has been a boon for consumers and users.

The software has lowered the cost of production and distribution, making it possible to create products that were not previously feasible.

The benefits of open source are similar: It lowers the cost of development by enabling anyone to build on top of existing code.

The downside is that monetizing open source can be challenging because upgrading features that were once free may lead to a consumer backlash.

Technology

Adamou Boubacar Amadou Twitter

Growth Specialist and Content Creator. I write content at the intersection of business and technology to help you learn while I do the same. Helping SaaS Startups Scale With Digital Marketing.