What are open-core business models?

Open-core business models are a way for companies to offer both free and paid versions of their software. The core product is released as open-source under a permissive license, allowing anyone to use, modify, and distribute it. However, additional features, tools, or services—such as advanced security, enterprise integrations, or managed hosting—are kept proprietary and sold as commercial offerings. This approach aims to balance community-driven development with revenue generation, leveraging the open-source project to attract users while monetizing premium capabilities.

A key advantage of open-core is that it lets developers adopt and customize the core software without upfront costs, which encourages widespread use and contributions. For example, GitLab’s Community Edition (CE) provides a full DevOps pipeline for free, while enterprise features like audit logging or compliance tools are part of its paid tier. Similarly, Docker’s open-source engine enables containerization, but businesses pay for Docker Desktop’s GUI or team collaboration features. This model benefits companies by building trust through transparency (since the core is inspectable) and creating a feedback loop where community needs can shape paid offerings. However, it requires careful planning to decide which features remain open versus proprietary, as overly limiting the free version can drive users to forks or alternatives.

Challenges include maintaining a clear distinction between tiers without alienating the community. If critical features are locked behind a paywall, developers might view the open-core project as a “teaser” rather than a viable standalone tool. For instance, Elasticsearch faced backlash when AWS created a competing service using its open-source code, leading Elastic to relicense parts of its stack. To succeed, companies must prioritize features that appeal to enterprises—like scalability or compliance—while keeping the core robust enough for everyday use. Projects like Redis (with its Redis Labs modules) and NGINX (with its Plus edition) demonstrate how open-core can work when the free version remains functional for most users, while paid features address niche or complex needs. This balance helps sustain development while keeping the community engaged.