How to make money from open source / open source revenue models

A friend asked me the other day: “I heard you work for an open source company, must be frustrating not making money from your code… how can you make money if you give away your code and IP?”

Well, I have been asked this question many times, and it is time I put my answer in writing:
You do not make money out of open source. You can, however, use open source to create profitable revenue channels and sell other products and services that are related to open source.
There are at least three revenue models based on open source leveraging:

1) Dual license model

Release the product under a restrictive open-source license and provide an alternative proprietary license. This is a good strategy if you have some sort of monopoly, if you are a market leader or have an open-source product that no one else has in the open source world.

Motivation: The client really likes the open-source product and needs it for commercial use. He does not want to breach the open-source license and is willing to pay for a proprietary license.

Open-source license: GPL is the only suitable license to this strategy because of its restrictive constraints and its viral behavior (you need to be GPL to use GPL).

Example: MySQL

2) Dual product model

Penetrate the market by releasing an open-source product, sell a different product (extended version, plug-ins or an application that is based on the open-source product). This is a good strategy if you have an up-hill struggle to become a market leader or if there is strong competition. You utilize the open-source to become a well-known business technology leader.

Motivation: The user gets to be a part of an open-source community process, contributes to the source and improves it. Users purchase other related products from the project professionals.

Open-source license: MIT, BSD, Apache or any other non-copyleft license.

Example: eclipse and its non open source plug-ins.

3) Professional services model

Sell support/customization and other Professional services. This strategy requires a large base of clients that want to use the product. In addition the product must not be simple to use or else users will not need any professional services. There is no problem implementing this strategy combined with one of the other strategies, in fact it is recommended as a complementary strategy for both.

Motivation: We are the experts in this open-source project because we wrote it, therefore clients would like to purchase support and other services from us.

Open-source license: Any

Example: JBoss

I am currently exploring other ways and I will keep you up to date.
You might also read these articles:
Does the open source professional services business model suck?
Software As A Service Takes The “Free Beer” Out of Open Source

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Amir Shevat

Amir Shevat is the global Startup Outreach lead in Google Developer Relations ( Previously, Amir Led Google Campus Tel Aviv and was the co founder of several startups.

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