Open Source Monetization: Gaps and the Way Forward

Open source software runs most of the modern world with over 78% of businesses reporting that they use OSS and the overall market is predicted to cross USD 66 Billion by 2025. This is a market waiting to reach its full economic potential. Though OSS is…

Open source software runs most of the modern world with over 78% of businesses reporting that they use OSS and the overall market is predicted to cross USD 66 Billion by 2025. This is a market waiting to reach its full economic potential. Though OSS is born free, with its source code available to everyone to use, study and even make changes, this doesn’t mean that OSS companies cannot be viable economic opportunities, contrary to common perception.

While most open-source projects often start as hobbies and side-hustles, as projects become larger, maintaining them over long periods becomes a hassle. Without any income streams, Open-Source projects have to rely completely on unpaid volunteers which will eventually become unsustainable as time commitments and lack of incentive become an issue for the maintainers and collaborators alike.

For volunteers who are most likely full-time developers, between work, friends, family and life, a steady commitment to the project can be a struggle. According to experts, the major cause of failure of open source projects is the maintainer losing interest or being unable to support the project any longer. This is where Open Source faces a hurdle.



The Problem

Unlike private software, open-source projects lack the fundamental building block of capitalist institutions – Aligned incentives. While consumers of Open Source get something for free, those building the OSS get nothing else but more unpaid demands, to fix bugs and add additional features in return from their customers. Institutions lacking incentives like the Soviet Union’s socialist economy are seen to fail sooner or later in the absence of aligned incentives. For the momentum of Open Source Software to sustain, monetary incentives need to be built around the system while maintaining the open nature of these projects. Additionally, building monetary incentives could also improve the quality of open source projects, as maintainers would no longer be under financial and time constraints.

Lately, companies and maintainers seem to have caught on to the problem and are finding innovative ways to work around it. One way is to bring in external funding to pay the maintainers and developers for their time and effort. However, for a project which is never going to bring returns, you’d need to find a really stupid investor!
Another source for funds may be donations and crowdfunding. Lately, through programs like GitHub sponsors, users are directly contributing to projects, to support the open source software they use. However, donations solely rely on the goodwill of people and may be short lived. Additionally, crowd funding of ideas, on platforms like Kickstarter are mostly successful, only for extremely popular buzz projects.

The most sustainable option would be to monetize such projects while sticking to their open model. This is a struggle that founders of open-source projects are faced with. However, today numerous open-source software companies have learnt to work around this, some like MongoDB and Databricks have even captured billion-dollar valuations. But monetizing open source software continues to be a challenge.

A variety of business models are being tested for various OSS projects currently, each needs to be customized to the product on offer.



Hosting Services

One tried and tested way to make money from OSS is by allowing users to run the software for free on their servers, but charge them for a hosted version, which they can use to avoid the hassle of maintaining servers. The promise of these cloud systems is both ease of use and cost effectiveness, enabling clients to forgo managing their own infrastructure to run the software. It also eliminates the need to train and employ people skilled in such infrastructure.



Training

Linux Foundation and Redhat have been clear winners of this model. They provide paid training modules on use of their products and services.



Support Services and Consulting

Open-source giants like Red hat have sold their support and consulting services to monetize their projects, as larger companies prefer to have customer support from the company that built the software rather than spending additional resources on troubleshooting and bugs.



Open Core Model

One of the most popular business models in the OSS space, remains to be an open core model, where the base software remains free but additional add-ons that companies will most likely require, are available at a premium price.



Conclusion

These business models, however, are no one size fits all and need to be customized to the product in hand. While monetization is a requirement for the future of OSS to be secure, there are numerous business models to be pursued and tapped into in this space. As the last few years have seen OSS companies like HashiCorp and Elastic gain large valuations, the future of open source definitely seems bright!

Aviyel works with open source creators to build and incentivise active communities, achieve financial independence and increase adoption of their projects. We are building a knowledge sharing platform that offers seamless and guaranteed exchange of knowledge, support and content around open source projects between the open source community and the businesses and developers who build great products using them.
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» Open Source Monetization: Gaps and the Way Forward | Charu Veluthoor | Sciencx | https://www.scien.cx/2021/09/21/open-source-monetization-gaps-and-the-way-forward/ | 2024-03-28T15:46:29+00:00
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