Tag Archives: business models

Open Source Business Models

17 Nov

Whenever we’re asked about Kaltura’s business model, we find ourselves launching into a broader conversation about the different business models used by open source companies today.  Given the frequency of this conversation, we thought we’d write it down… both for those who are thinking of open sourcing their code and for those pondering whether to work with an open source company.  This is part of our larger effort to define “Launching an Open Source Project/ Company 101” and to catalog the variety of models and companies emerging in this space. We are particularly interested in Companies who fully own the copyright to their software, yet decide as a matter of strategy to release their code under an open source license.

The first fundamental question to ask when assessing which business models may apply to an open source company is: who owns the copyright for the code?  The open source ecosystem breaks down between companies that own the copyrights to their code and have the freedom to release that code under any license, and those who adopt existing code and have no choice over licenses.

  1. Options for companies who do not own the copyright to their code (Red Hat, Zend, JasperSoft):
    1. Services Model – according to this model, a Company sells maintenance, support, documentation, and training services, as well as certification of the software version, in conjunction with the open source software. Customers pay for the peace of mind of having the code tested, certified and maintained by the services company. (This is the basic Redhat model.)
    2. Software as a Service – according to this model, the open source project serves as a foundation for a SaaS offering. In a SaaS model, customers pay for the hosting, streaming, and delivery of the software on a managed cloud, regardless of the license of underlying software (Acquia Model).
    3. Proprietary plugin/application model – according to this model, a company sells premium commercial add-ons, modules, and applications in conjunction with the open source software and then packages both the underlying code and the apps together.  (Jaspersoft is an example here)
  2. Business models available for companies who own the copyright to their code and have decided to release the code under an open source license (examples: Kaltura; MySQL, Instructure)  (We’ll explain why they might decide to open source code another time)
    1. First, note that all of the business models available for companies who do not own the code are also available to this second set of companies as well: ie. Services model, SaaS, and Proprietary Add-ons/ Apps.
    2. Dual licensing – according to this model, a company releases the code they own under a standard commercial license as well as under an Open Source License. Whereas the open source version is usually free, the commercial option often comes with a standard licensing fee. (This option can exist, with or without feature parity between the open source and commercial versions.)
    3. Freemium Model – according to this model, a company releases software under an open source license and sells premium features on top.   Unlike in plugin/app model, here a company need not create an entirely separate module or plugin. The owners of the code can just chose not to release certain features.

We hope this gives you a basic breakdown of the options. In the next post we’ll explore the advantages of releasing code under and open source license and creating an open source project.