Why would a startup choose to spend its time and money developing and marketing open source software? The answer is simple: open source is great for business.
We have just released ServiceBot, a platform to sell services, and it’s 100 percent open source.
Open source as a saviour for startups
Are we really going to open source our startup’s product? This is the question we kept asking ourselves. After considering the pros and cons, our conclusion was that open sourcing our product was the best option for our startup.
Why open source is good for business
There are many positive reasons to open source a product:
- Contributions — Open source projects attract developers from around the world who want to help the project. This collaboration helps to drive down development costs.
- Quality — More eyes on the code means higher quality and more robust security.
- Control — Customers like being in control of their data. With open source, a customer knows that their data is secure and is not at the mercy of a third-party.
- Trust — Creating open source software builds trust between a business and their clients. This trust factor goes a long way if later a business would like to offer paid solutions such as plugins or premium versions.
- Customisability — Users can tweak small parts of the application and develop plugins in order to get things “just right” for their use cases. They may even contribute these tweaks to the product which improves the core codebase.
- Community — When software is open source, the users, contributors and followers can become advocates, essentially giving free advertising and support for your product.
Elephant in the room: Open source software is free to use, forever
The fact that open source software is free is the largest contributing factor to why more businesses don’t open source their products. Most have not realised that free software is not necessarily a bad thing for business. If harnessed properly, the free aspect of open source can be a boon to the business by pursuing a traction channel that is often overlooked.
Making your software open source is a double-edge sword. Anyone can “ride for free” and use your product without paying you a dime. However, it also lowers the cost to adopt making it one of the best marketing tools a business can use to gain traction. Figuring out how to utilise a large base of free-riders is not a problem but rather an opportunity that can be taken advantage of and create a successful business.
How to monetise an open source product
Building a business around open source is not a new concept. We looked at successful open source businesses to find the different methods used to harness the advantages that open source software brings.
Automattic (Creator of WordPress)
WordPress is powering 27 percent of the entire Internet, and it is completely free to use. Automattic uses its large base of free-riders to leverage the advantage by being able to sell plugins which enhance WordPress as well as offering a paid solution with robust support.
The definitive open source business, Red Hat brought in revenue exceeding $2 billion last year. More than 90 percent of Fortune 500 companies use Red Hat’s services. This is not because the software is free, rather because they offer excellent services around the software they create. Red Hat offers their large base of corporate users peace of mind. When something goes wrong, you have a direct line to the engineers who built the software ready to resolve your issues.
Discourse is an open source platform for building a community. Founded by Stack Overflow founder, Jeff Atwood, Discourse currently makes $120,000/month from their hosted service and is doubling that each year. The Discourse platform was founded under the belief that it is okay to ask people to pay for free software. By creating a frictionless process for the customer to pay for your software you replicate the success that companies such as Netflix and Spotify achieved in getting people to switch from piracy to a paid platform. The Discourse team believes that open source is not just the right thing to do for the world, it is also the right thing to do for business.
Should you switch to the open source model now?
We are confident we are making a correct move by founding our startup around open source software. Other businesses should take a look at the product they offer and ask the question: What would change if our software was open source? Making it free will lower the barrier to entry, open source means you can get a lot of people looking at and improving your code base without any cost to you.
Open source makes the world a better place, and it can also make your business flourish once you figure out how to harness its benefits. This is why we chose to be open source.
Great article, I would only add two more points:
1. Independence: By buying Free Software you become more independent because you can maintain the software by yourself, switch the service/support provider if someone offers better service/support and you are not lost if the original company no longer exists which is a valid risk, especially (but not only) for startups.
2. If you write software yourself, building on Free Software allows you to try out different solutions without the risk of failing while you already paid a large amount for the underlying technology. We all know projects which become “to big to fail” because you put already to much money into it, are already bound to subscriptions, etc. This risk can be lowered significantly by building on top of Free Software.