How is Open Source Software Becoming a Core Business Model for StartUps?


How is Open Source Software Becoming a Core Business Model for StartUps?

Nowadays, the way enterprises purchase and use a software is changing. And yes, we are talking about open source software which was an exception then and is a must now for enterprises. The reason, one can adopt the software for free of cost and it’s open to changes. When around 80% of enterprises are running on open source technology, we cannot deny the fact that open source is the new wave in the IT industry.

Why can be Open Source Software better for Enterprises?

You need to balance a whole lot of things when selecting a software for your enterprise. You need to go through the features of the software, validity and support given by the vendor, how much it costs for ownership, and your strategies for the growth of your company etc. Depending on all these things you can select the software for your company, be it open source or commercial.


With an open source software, you can have the access to the source code. There would be a community of the software where individuals can make changes to the code and give security updates and new features to the software. So, this software can be improved further.

Here are some  Advantages of Open Source Software that Attract Enterprises:


  • Speed and Control

The software you are using should give you agility that results in rapid product delivery and new innovations. With commercial software, you may need to wait to get updates of the software. But there is no such problem with open source software. And they need not wait for the updates from the vendor. They can make updates depending on their requirement thereby helping others.

  • Dealing with large scale data

In the globalized world, software companies are providing their services to millions of customers. Commercial vendors cannot handle such a large number of users and the data. But there is a solution for this problem with open source software. The leading open source companies like Google, Yahoo, and LinkedIn etc. have shown solutions to such problems and contributed to the open source community.


  • Power to developers network

Software service enterprises are encouraging their developers to use the open source software. Frontline software developers are much interested in the open source technologies as they can adopt, deploy and actively participate. With the network of developers in the community, open source software is seeing an exponential growth with better safety and security measures.

Business Model:

Many enterprises are thinking of how they can make money from their open source software. But if you plan clearly, you can make a business model for your open source software. There are two ways of doing this:


You can sell the enterprise versions of your open source projects. You can offer additional management and security features. Or you can offer SaaS (software as a service) with a premium service like pay-as-you-go model. This could be helpful for you as a revenue route when it is difficult to packaging all the components of open source software into a single cloud-based offering.

  • Example of RedHat

The executives of RedHat drew a clear sketch between their free user community of Fedora and RHEL (RedHat Enterprise Linux) product which is so sophisticated. Operation Executives and CIOs who are their targeted buyers were giving value to the stability over the features of the product. They wanted a paid, enterprise-grade product that supports their core LINUX applications.


RedHat executives observed this and maintained an open source community around their Fedora. They regularly updated it with new features for every six months. For people using the paid product, they marketed an enterprise-grade with security and optimization for Intel hardware. With these strategies, RedHat boasted a revenue of $1B. It also made LINUX a widely used server OS.

  • Licensing Model

You can determine the people who can modify your code with licenses that range from permissive level to restrictive level. There are some licenses that allow only the owners of the product to create derivative works on the original product whereas some allow any developer. To build a large ecosystem, permissive licenses are so useful. However, more permissive licenses may make it harder to create revenue and avoid fragmentation.

  • Sales Cycle

The sales cycle of the open source software is different from any other traditional commercial software marketing. For a commercial software, it is difficult to convince the users to use your product as they need to pay for it. In contrast with that, it is very easy to convince a user to use an open source software as they need not pay for it.


With all this said, it is clear that we can make good money from open source software. To do it in a right manner, you need to focus from the beginning itself on monetization and licensing. You need to maintain your service team that your end users hardly face any problem. Almost all the enterprises are running on open source software, we can say that open source is the new wave in the software industry.