Five mod­els for open source rev­enue

How do you earn money from some­thing that’s given away free? We look at five meth­ods which have been suc­cess­fully used by com­pa­nies


Open source is of­ten as­so­ci­ated with the word ‘free.’ How­ever, there are cer­tain ways to gen­er­ate a rev­enue stream. Paid sup­port: Paid sup­port is the most com­mon busi­ness model used by or­ga­ni­za­tions ey­ing rev­enue through an open source model. The model is sim­ple: the core soft­ware is freely down­load­able, but once cus­tomers start us­ing it they will need sup­port since not ev­ery­thing may work out of the box. Red Hat has built a bil­lion dol­lar rev­enue stream based on this model; its sup­port works on a sub­scrip­tion model, which is re­newed an­nu­ally.

Ben­galuru-based Deep­root Linux has been giv­ing away its soft­ware for free but has been charg­ing for sup­port. “Prac­ti­cally ev­ery­thing we have cre­ated over the past 14 years has been given away for free. Cus­tomers have down­loaded, filed bug re­ports, and one in a few hun­dred has come back and signed for paid sup­port,” says Ab­has Ab­hi­nav, CEO, Deep­root Linux.

Re­duc­ing oper­a­tion costs: Google, Ama­zon, Red Hat and Zoho are ex­am­ples of a few suc­cess­ful com­pa­nies that have lever­aged open source to build cost-ef­fec­tive prod­ucts. These com­pa­nies have taken ad­van­tage of the fact that the soft­ware comes free, and that this has re­duced their li­cens­ing costs since they run hun­dreds of thou­sands of servers.

“We run OpenS­tack on our server in­fra­struc­ture and have saved on an aver­age $3,500 per server on li­cens­ing alone. This has helped us to of­fer cloud in­stances which are 20-30 per­cent cheaper than the com­pe­ti­tion,” says AS Ra­j­gopal, MD, Nx­tGen Dat­a­cen­ter & Cloud En­ter­prise, Ben­galuru.

Re­duc­ing project costs: IBM has gone on record to say that it has saved over $20 bil­lion in project costs while us­ing open source soft­ware to solve cus­tomer prob­lems. The big­gest ad­van­tage of open source is the com­mu­nity sup­port. “Most open source de­vel­op­ers rely on com­mu­nity sup­port to solve each other’s prob­lems. This re­duces soft­ware de­vel­op­ment costs tremen­dously,” says Tarique Sani, CTO of the Nag­pur-based SANI­soft Tech­nolo­gies.

Stud­ies by Black Duck Soft­ware have proved that the cost-ef­fi­cien­cies of us­ing open source soft­ware in soft­ware de­vel­op­ment can be as high as 62 per­cent as com­pared to us­ing closed source prod­ucts.

“By us­ing OpenS­tack, we have saved $3,500 per server on li­cens­ing alone. We can now of­fer cloud in­stances which are 20-30 per­cent cheaper than the com­pe­ti­tion” AS RA­J­GOPAL MD, Nx­tGen Dat­a­cen­ter & Cloud En­ter­prise

Sell­ing host­ing ser­vices: Build an open source prod­uct, pop­u­lar­ize it, and of­fer the prod­uct on a SaaS model with sup­port. This is the lat­est rev­enue model which a num­ber of global start-ups have suc­cess­fully used to cre­ate rev­enue. Seafile, an open source al­ter­na­tive to Drop­box, pro­vides the soft­ware free but of­fers the same ser­vices on a SaaS model. Sim­i­larly, Su­gar Inc, which open sources Su­garCRM, the pop­u­lar en­ter­prise-class CRM so­lu­tion, of­fers its soft­ware on a SaaS model.

“You need not own or con­trib­ute code. For ex­am­ple, we of­fer, on a hosted model, a num­ber of open source soft­wares such as Zim­bra, Word­press, Dru­pal and VtigerCRM, and charge cus­tomers on a pay-as-you-go model. Our en­gi­neers are well-equipped in an­swer­ing queries and pro­vid­ing sup­port,” says Manoj Rao, Se­nior Man­ager, Host­ing Raja, Ben­galuru.

Ap­pli­ance model: It is es­ti­mated that al­most 70 per­cent of commercial net­work hard­ware use com­po­nents of Linux or Free BSD. A ma­jor­ity of net­work routers use ver­sions of IP Ta­bles of IP Chain for de­liv­er­ing ser­vices such as fire­wall or QoS. Many com­pa­nies such as D-Link, Asus, Buf­falo, Net­gear and HP have re­leased commercial hard­ware which makes use of open source us­ing the ap­pli­ance model.

En­jay IT So­lu­tions has suc­cess­fully demon­strated this in mul­ti­ple prod­ucts. “Whether it is our Tor­nado OS in­side our thin clients or the soft­ware that pow­ers our NAS or Tin­guin OS, we have built them on top of Linux and cus­tom­ized them to cre­ate hard­ware that has been ac­cepted by both cus­tomers and part­ners,” says Limesh Parekh, CEO, En­jay.

“Most open source de­vel­op­ers rely on com­mu­nity sup­port to solve each other’s prob­lems. This re­duces soft­ware de­vel­op­ment costs tremen­dously” TARIQUE SANI CTO, SANI soft Tech­nolo­gies

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