Building Profitable Open Source Business Models

The world is moving towards more open source solutions, but are there proven business models that can help open source companies sustain themselves? Should new companies venture into the world of open source?

Even large proprietary organizations like Microsoft are openly talking about it. Google and Microsoft are investing millions of dollars in the open-source ecosystem. Business models like professional services and cloud hosting are evolving, but the big question is: What are the opportunities available to organizations that aim to or are already working on, being an open-source player?

Cue: Microsoft’shere!
We have all used software developed by Microsoft, and the biggest cue that open source is indeed the future can be derived from what this organization is doing on the open-source front. “Satya (Nadella) was very clear when he took over Microsoft that it has to be more open than it ever was,” says Sanjeev Sharma, director, new ISV partnerships, Microsoft.

Subsidize and maximize:
The open-source business model of tech giants such as Microsoft, Amazon, and Google is subsidized by the cloud services they sell.
Red Hat CEO Jim Hariri: “You should look at how you are going to sustain your open source contributions”.
Tetra Information Services Pvt Ltd. MD Mukul Mahajan: “Open source might be more of an enabler that helps get traction and build newer business models”.

Marketplace, enterprise and community software; and the role of the cloud:
Most open source business models are offered as enterprise and community editions. The debate around whether the cloud is making open-source popular, or vice-versa, is something that experts still lock horns on. “Open source is what actually drove the cloud in the first place,” says iNextrix’s Samir Doshi.
“I definitely see the partnership between the cloud and open source evolving,” says Kabir Chandhoke, COO, SourceFuse Technologies.

Partnerships with big players:
1. To partner with a big player like Microsoft can be a big opportunity for startups and organizations already operating in the domain of open source.
2. More than 60 percent of the solutions being offered are based on open source!

Why do open source companies have high valuations?
1. The conflict between Amazon and other companies is also one of the reasons for the high valuation. The answer lies in the consumer base that many of these organizations have.
2. Big players (the ones providing cloud services) have now also started facilitating open source stacks.

Going by the trend, it looks as if every big company will soon join this open-source business model race, which could lead to big changes in the open-source ecosystem. Open Source Business Models also allow young and experienced developers to polish their skills and provide an opportunity to have their code checked by some of the best and brightest in the world.

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