Open Source Revenue Streams
I recently I read an article The Lack of Compensation in Open Source Software is Unsustainable. It makes some good points. I agree there should be better mechanisms to compensate Open Source developers. I also believe it’s better now than it has ever been. Here’s some paths available now:
Traditional Venture Capital
You know the drill: angel investors, seed round, A, B, C, IPO, etc. We’re not going to talk about that here. It’s covered in detail elesewhere and beyond the reach of most Open Source authors.
Foundations
No, not the Asimov books, but well established groups that provide support for Open Source projects, like:
The Linux foundation is the mothership for all things Linux. They write Linus’s paycheck. With the rest of their funds, they provide support for hundreds of projects, to the tune of about $250M per year! see their annual report
The Apache foundation is a lot smaller, with only $2.2M per year. But they’re well known for supporting and incubating projects, like Spark and Hadoop. Oh, yes, they did a web server too. See their annual report
There’s a slew of others, with varying organizational and financial health. Feel freel to examine them for yourself.
Crowdfunding
These are ways to fund a project: a deliverable with a timeline.
The venerable Kickstarter channels about $75M per year. One of the poster children for Kickstarter software success was when Font Awesome 5 raised over $1M on kickstarter One of the keys to their success was if you were a sponsor you got access to an extended set of glyphs. For more dollars you could even get your own logo included as a glyph.
Indiegogo seems to be less successful fundraising for open source judging by my googling around.
Patronage
These are sites that enable a creator to get a stream of revenue from supporters without guarantee of a future deliverable.
An easy entry is buy me a coffee with annual revenue of $4.4M. Odd that is’s twice the revenue of the Apache foundation.
The big one in this space is of course, Paetron The best guess is they pass along $80M per year, less their cut.
One of the more notable software products that has relied on patronage is Even You’s Vue.js For the longest, they were on Paetron, but lately he’s moved to Open Collective and Github Sponsors. Sponsorship gets you or your organization listed on the Vue website. That’s it. No early acces, bugfixes, or decoder ring.
Services
According to the Business Research Company, the global open source services market is about $30.57 billion and growing fast.
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Services is what made RedHat into a $3B annual company. They provided services for Linux. Mainly support and bugfixes.
This is where the money is on open source.
Services can be simple: bug fixes, tutorials, priority for future enhancements, early access to new releases, etc. These are things a good open source project maintainer would do anyway. The difference comes in communication with the end user, to make them feel part of the process.
Before Oracle bought them out, MySQL made money by offering their database software under two licenses: the open source license which was free but offered no support, and a commercial license that brought with it actual support in terms of fixing bugs, answering questions, etc.
Most Open Source projects that are turned into services go the route of Software as a Service (SaaS). One pays to access the software over the internet, usually by API or web interface.
Selling a Product
Here’s what a number of developers don’t realize: in order to sell something, it has to be a package, or product that someone can purchase. A product is a well-defined offering that someone can understand: the price and what you get when you pay that price. Something that the end-user can run a spreadsheet about and see the value offered. Something they can easily buy with clear benefits to themselves or their organization.
My wife and I were at the local Golden Corral the other evening in our small Georgia town and I saw a van parked outside with vinyl wrap all around advertising Odoo. For those who haven’t followed the name change, Odoo was originally OpenERP, an open-source Enterprise Resource Planning (ERP) package written in Python. Odoo pulls in $178M or so per year. Odoo has the usuall “Free / Standard / Custom” product offerings as depicted below. They sell productized services.
Some may think their software isn’t “product-izable”. Maybe, maybe not. Consider someone who produces a library. Let’s say a barcode library. A developer can invoke the library on an image and it can return a structure of what type of barcode it found and the value. It’d be possible to productize this by putting it behind a serverless function and offering a web-accessible API for a price. The developer makes and API call with their unique API key and posts an image. The library then scans the image for barcodes and returns a structure of the barcode type and value it found. There are a number of API management platforms that make such billing and subscriptions fairly easy, thus turning a simple library into a product.
Bundling
This is where products start to take off. Suppose the barcode API SaaS provider now partners with a provider of a UPC database. So now for an additional fee, the user of the service not only gets back the UPC number, but the manufacturer and the item name. Or take it in a different direction and allow the user to upload his own non-upc item name and description and have a barcode generated. Then whenever that specific barcode is entered, the name and description are returned. This would be the basis for a low-volume inventory management system, which is a fairly healthy niche to play in.
The Obsidian markdown editor is free, but they make their money by 1) offering a $50 annual commercial product that gets you priority support and a commercial use license and 2) offering a cloud-based storage service that integrates seamlessly with the editor, for $8 per month.
Multiple Revenue Streams
The Obsidian example above reminds us that the most successful Open Source projects have multiple revenue streams: patronage, books, classes, SaaS, premium versions, etc. There are many examples, one product I’ve used is Percona: a fork of the open source version of MySQL. A look at their products page shows exactly this: support, managed services, consulting and training. Go forth and do likewise.
Conclusion
There are many different revenue streams available for Open Source, from the casual “tip jar” type up to contractural commitments and foundation sponsorship. Most of these revolve around the Open Source offering becoming some sort of “product” that can be purchased and which confer solid cost-justified benefits.
Postscript
If anybody in the open source community wants to bounce any ideas around for productizing their project or bundling into a larger offering, I’d be happy to talk with you about such things.
