How do companies monetize open-source software?

Companies monetize open-source software by leveraging the collaborative nature of open-source projects while offering value-added services or proprietary features that users are willing to pay for. Common strategies include providing enterprise support, hosting managed services, and offering premium versions with advanced functionality. These approaches allow businesses to sustain development while keeping the core software accessible to the community.

One primary method is offering paid support, training, and consulting services. Many organizations rely on open-source tools for critical operations but lack in-house expertise to manage them effectively. Companies like Red Hat (with Red Hat Enterprise Linux) and Elastic (with Elasticsearch) provide subscription-based support, including security updates, patches, and 24/7 technical assistance. For example, a developer using PostgreSQL might use the free version but pay for guaranteed response times to resolve urgent database issues. This model works because businesses prioritize reliability and accountability, especially in production environments. Consulting services, such as custom integrations or performance optimizations, also generate revenue by addressing specific client needs that go beyond basic community support.

Another approach is providing managed cloud-hosted versions of open-source software. Developers often prefer to avoid the operational overhead of self-hosting, so companies offer scalable, fully maintained solutions. MongoDB Atlas, for instance, is a cloud database service built on MongoDB’s open-source core, handling backups, scaling, and security. Similarly, WordPress.com offers a hosted version of the WordPress CMS, simplifying setup and maintenance for non-technical users. These services often include proprietary add-ons like advanced monitoring or compliance features. By abstracting infrastructure management, companies appeal to users who value convenience without sacrificing the flexibility of open-source foundations.

The open-core model is also widely used, where the base software is open-source, but advanced features are locked behind a commercial license. GitLab’s Community Edition is free, but its Enterprise Edition includes proprietary tools for compliance, security, and project management. HashiCorp adopts a similar strategy with tools like Terraform, where enterprise-grade collaboration and governance features require payment. Some companies, like Redis Labs, use dual licensing: the core remains open-source, but add-ons (like Redis Modules) are proprietary. This balances community trust with sustainable revenue, ensuring that businesses pay for specialized capabilities while individual developers can still innovate freely. By aligning monetization with value-added services rather than restricting access, companies maintain community engagement while funding ongoing development.