How to generate Income from Free and Open-source Software

This post compiles different ways to generate income when developing or managing free and open-source software (FOSS) projects. The posts goes beyond projects within the FOSS definition, and also covers related projects that fall under the definition of open core.

To review the meaning of software licenses categories like FOSS and open core, you can read this post.

The revenue streams covered in this post are the way into business models based on FOSS

Commercial Open Source Software (COSS) is software based on FOSS that is conceived with the aimed profitable. Please remark that the definition says “software based on FOSS” and not just “FOSS”, as what is generally considered as COSS is sometimes out of bounds of the Free Software and Open Source definitions and it is considered proprietary. In fact, COSS could be either FOSS, source-viewable or open core software.

Ways to generate Income from FOSS

Ways to generate income from FOSS projects featured on this post:

  1. Selling services
  2. Selling accessories
  3. Selling content
  4. Getting donations and grants
  5. Using FOSS and Commercial Multi-licensing
  6. Selling time-limited proprietary software

1. Selling Services

Services that can be sold in relation to FOSS:

  • Development
  • Support
  • Cloud
  • Training
  • Certification

An example of company that produces FOSS and then get incomes from support is Red Hat.

You can offer the same FOSS that is available but in an as-a-service or cloud model. This service would be payable, and it is not against the FOSS definition.

This is the case of ProjectLibre Cloud.

2. Sell Content

Use a FOSS application to display products or services that can be purchased.

This is the revenue model of Android Open Source Project (AOSP) developed by Google, where most of the incomes comes from purchases and subscriptions made from the Google Play Store, that is installed by default in most Android devices.

Note that in this example the Play Store is proprietary and Google Android is open core (not FOSS), so it is not probably the best example.

3. Sell Accessories

Sell products different to the official brand, like documentation, training material or merchandise of official brand.

This is part of the means of funding of the Free Software Foundation Europe (FSFE) at its online shop.

4. Get Donations and Grants

The project itself may not be profitable, but it may be of interest of other organizations or individuals that have their own revenues.

If this is the case, you can fund your project by sponsors, either from the public or private sector.

This external economical support may be done through donations or grants by sponsors or patrons.

An example of publicly funded FOSS project is disassembler Ghydra, developed by the American National Security Agency (NSA).

An example of privately funded FOSS project is Godot Engine. You can read more about its sponsors on this external link.

5. Use FOSS and Commercial Dual License

Multi-licensing software implies that its source code is released in two or more licenses. Dual license software is multi-licensing software that has two licenses exactly.

The dual license model proposes that the whole project source code is released under both licenses at the same time as FOSS and proprietary.

Companies or individuals who wish to reuse the source code in a way that is not compatible with the FOSS license (e.g., a proprietary, closed-source product, that wants to avoid the risk of merging its code with GPLed software) can purchase a commercial license.

On this approach it is convenient that contributors sign a Contributor License Agreement (CLA), in which they grant rights for both the FOSS and proprietary versions of the project.

An example of use of dual licensing is MySQL, that is released under both GPL and a commercial license.

While using dual license, some organizations are switching the FOSS license to a source-available license, like Elastic NV did on Elasticsearch and Kibana in 2021, switching from Apache 2.0 to SSPL. This is criticized by some members of FOSS communities, as developers contributed to an open project that has suddenly become proprietary, and the situation forces the community to fork the project.

6. Sell Time-limited Proprietary Software

This way implies releasing a program as proprietary and closed source, but providing a mechanism to free it provided some conditions (for example, after a certain amount of time).

A time-limited proprietary or delayed open-source license frees the source code after a given amount of time. Example of these licenses are Functional Source License (FSL) and Business Source License (BSL). You can read more about these licenses on this post.

Take into account that the released software will be FOSS only from a date in the future, and the project will be source-available and proprietary in the meanwhile, so this practice is not well regarded by the FOSS community.

The first example of this model is probably GhostScript. According to Raymond in his essay “The magic cauldron”, section “Free the future, sell the present”, this strategy was used with this product when it was released in 1988, using the source-available Aladdin Free Public License (AFPL), though later it would switch to a dual license model.

Another more modern example is Sentry Terraform software developed by HashiCorp, that uses Business Software License (BSL) since 2023.

Ways to generate Income from Open Core Software

Open core software combines parts of source code under either FOSS and closed-source licenses, resulting in a combined work of closed-source software.

Do not confuse it with dual license or multi-licensing, where the whole project holds two or many different licenses simultaneously.

Companies may offer a free and open version of the software for the community users with basic functionalities and a paid version with additional features or less restrictive terms aimed to commercial or enterprise users.

Proprietary projects like open core can generate income streams in additional ways that pure FOSS projects cannot, as for example:

  • Freeware model
    • Exploit user data obtained by telemetry
  • Freemium model
    • Pay to unblock functionalities
    • Pay to remove use restrictions (time, tries, etc.)

Take into account that open core software is not considered FOSS, as it is proprietary, so this practice is not well regarded by all members of the FOSS community.

Examples of business models based on open core:

  • The official Visual Studio Code binaries is freeware that exploits user data obtained by telemetry.
  • As of 2024, Grafana offers both a FOSS AGPL version and a freemium proprietary Enterprise version, as explained on this external link.

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External References

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