Demystifying Open Source as a Business - OpenSource.net
Open Source has come a long way. After years of labeling Open Source software as “communism” and a “cancer,” Microsoft changed sides under Satya Nadella’s leadership and bought GitHub, the platform that is home to nearly all Open Source projects, for $7.5 billion in 2018. IBM, which relies heavily on proprietary software, acquired Red Hat in 2019 for $34 billion. Outside mergers and acquisitions, Google open-sourced Android, and even Apple, known for being extremely closed, open-sourced Swift, indicating the value they find in this approach. Yet, building an Open Source company means you’ll hear the same doubt over and over again: “How will you guys make money?”
The root of the question is partially linguistic. In English, “free” can mean either liberty or unpaid, leading to expressions like “free as in freedom” (liberty) or “free as in beer” (unpaid). We find Open Source software of both kinds, often called Commercial Open Source Software (COSS) and Free Open Source Software (FOSS), to clarify the distinction. Beyond semantics, a significant portion of the developer community genuinely expects that Open Source software will not be charged for, an expectation that cannot be ignored. So, do Open Source companies make money at all?
The short answer is yes. Looking at the past years of IPOs, many native Open Source companies grew to hundreds of millions of dollars in revenue: MongoDB, Inc. (MDB) went public in 2017 and has a current market cap of over $18 billion with $1.7 billion in annual revenues. Elastic N.V. (ESTC) went public in 2018 and now has a market cap of over $11 billion with $1.2 billion in revenues. GitLab Inc (GTLB) went public in 2021 and has a market cap of $8.5 billion with over $600 million in revenues. Confluent, Inc. (CFLT) went public in 2021 and has a market cap of $7.7 billion with over 800 million in revenues.
