Who’s Building Businesses Around Free and Open Source Software

Free and open source software occupies a unique position as a commodity and a business. Infinitely reproducible and easy to distribute (for those with good Internet access), the software has zero marginal cost (to use an economics term) but requires some expertise to create and substantial expertise to reliably maintain.

This article examines some companies that are making money by supporting free software. We’ll start with a sobering observation: the accusation made by critics of free software over the past few decades–that you can’t build a business selling free software–is true. Free and open source software is best owned by a community, not by a company. But thousands of individual programmers are making a living while giving all their code away, and viable businesses can be built around open source as well.

The article is part of a monthly series on the LPI blog to celebrate the anniversaries of several key open source projects, by exploring different angles and directions of the broad open source movement.

From CD Stacks to VM Stacks

Every company has learned how hard it is to go from prototype to product.  One historic example is the invention of the chronometer in the 18th century, chronicled by Dava Sobel in her book Longitude: The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of His Time. I don’t know whether Sobel chose the subtitle, because the key lesson I took from the book is that the inventor did not solve the problem on his own. He never could design a sturdy version of his invention that could be manufactured and sold at an affordable price–that achievement was left to a later engineer.

Free and open source software presents its own challenges in going from source to production-ready deployment. One of the early companies to bridge the gap was Cygnus Solutions, which helped develop many programming tools for the GNU project. Although the company served a narrow niche–programmers interested in using the GNU platform–this was an important part of the computing infrastructure in the late 1980s and early 1990s.

Michael Tiemann, the founder of Cygnus, reported years later on their contribution to their customers: “We were establishing a market price for all the planning that needed to be done to identify, collect, configure, test, document, release, and support packages of free software competitive with proprietary software.”

Cygnus also branched out, creating a free software, Unix-like environment called Cygwin to install on Microsoft Windows. Many Windows users who appreciated the strengths of the Unix shell and utilities installed this set of tools. Cygwin was the precursor to the Windows Subsystem for Linux, released by Microsoft in 2019.

The two-phase model of packaging a robust distribution of free software and following up with support had a more famous and successful proponent, Red Hat. Speaking about Red Hat at a conference, Tiemann said that he quickly recognized the potential in this small company and tried to acquire it, but the Cygnus board and management did not agree. Instead, Red Hat eventually bought Cygnus. Tiemann has held leadership positions at Red Hat since then.

As Chief Executive Office of Red Hat, Jim Whitehurst (now President of IBM) delineated in his book The Open Organisation that the key principles of open organisations are transparency, inclusivity, adaptability, collaboration, and community.

Red Hat remains remarkable in its tenacious commitment to remaining open source. It never adopted the “closed core” model that most companies use to offer free software. Red Hat supports communities that produce free software–notably the Java Spring framework–and releases free software of its own. For a long time, anyone could run a GNU/Linux environment using the exact same versions of software found  in Red Hat’s commercial release, Red Hat Enterprise Linux (RHEL), because a group of hackers called the CentOS project re-engineered the Red Hat procedures. After many years, Red Hat took over CentOS, and now it survives as a kind of test release for Red Hat, occupying a position between the rather experimental Fedora project and the stable RHEL. But other clones of RHEL exist too.

But Red Hat had to evolve quickly beyond its original role distributing CDs of its GNU/Linux distribution. They announced that they were moving “up the stack,” focusing more on frameworks such as Spring and other tools for the hot computing tasks of the day, such as Web development. They have continued to move with the computer industry into virtual machines and cloud computing, now focusing much of their attention on their OpenShift container-based environment.

The shift to OpenShift presents new business risks for Red Hat. When they focused on providing GNU/Linux systems to their clients, they occupied a fairly safe niche with only a couple competitors such as Canonical (who maintain the very popular Ubuntu distribution) and SUSE. Leaving this niche for virtual systems and the cloud puts both Red Hat and Canonical in the market shared by true giants, such as Amazon, Google, and Microsoft, along with VMWare and even IBM, the company that bought Red Hat in 2019.

Other than the Cygnus/Red Hat model and closed core, what other business models exist for open source? Eric S. Raymond, in his 2000 essay “The Magic Cauldron” (published in his classic book The Cathedral & the Bazaar), lists half a dozen ways to make money from free software. None of these have any significant use today. A more recent listing of open source business models is even sparser.

Today, most free software is produced under what I labeled a “closed core” model in 2011. The software is produced and shared by companies who based their strategy on something else. These companies may run an online service with a heavy proprietary element, such as Google, Amazon, and Facebook. They may make hardware, such as Intel or Cisco. Or they may be in some business totally unrelated to computing, such as automotive, but create software to scratch their own itch and then try to build a community around the software. We’ll look next at why the companies open up their software, and at some entrepreneurs who build their own businesses helping them do so.

Current open source businesses

Open Tech Strategies is run by two highly experienced programmers in free software, James Vasile and Karl Fogel. The bulk of their income is derived from coding free software for clients. They also offer consulting to businesses that need to plan open source strategies. Fogel wrote a highly regarded book titled Producing Open Source Software: How to Run a Successful Free Software Project (which I edited), and their company produced a list of archetypes for open source development for Mozilla.

In response to my request for a comment on this article, Fogel and Vasile pointed to https://opentechstrategies.com/files/presentations/2018-finos/finos-pres…(1) 15 reasons they’ve seen for why clients choose open source. Many of these are not intuitive to people outside open source, but they are founded on strong business incentives. Fogel and Vasile wrote to me:

Open Tech Strategies helps clients make smart open source investments that pay off in well-defined ways.  We do traditional open source strategy consulting, and we do implementation and co-implementation. Our developers both build products and do skills transfer to help the client’s team get comfortable with open source working methods.

The most common reason companies do open source is competition.  Once your competitors are getting on the open source bus, you can’t afford to be left by the side of the road.  And if you’re going to be on the bus, you want to invest enough that you get regular turns at the wheel.  The best reason to do open source is probably community.  The most successful open source is often built by groups of organizations with diverse interests.  Each pulls in their own direction, and the sum of those efforts is movement in the direction(s) the project ultimately needs to go.

Another company worth profiling for this report is LeadingBit Solutions, founded by Silona Bonewald. Bonewald has led open source projects at many large companies, and was an early builder of the related https://innersourcecommons.org/ InnerSource movement. I collaborated with Bonewald on some texts and worked for LeadingBit for a while.

One of the key services offered by LeadingBit is to help a company set up an Open Source Program Office (OSPO). Both corporations and universities increasingly find OSPOs a valuable investment. Some of the tools and practices that can help build an effective OSPO are described at opensource.com, a leading news and discussion site for the open source movement.

The first task of an OSPO to establish and record the location of all the free software that the company or college is using. Many managers don’t realize they are using and even distributing free software, because programmers sneak it in without telling management for a variety of reasons. This is both unjust and risky, particularly if the programmer inserts code with a restrictive license (basically the GPL) into the company’s proprietary product. Sometimes the charade ends because a proprietary product produces an error message that clues in the developers of free software that their code was stolen. Without transparency and accountability within the company, it can suffer from such embarrassments.

Some other tasks of an OSPO include:

  • Defining rules for using and producing free software
  • Giving employees leave to participate in outside free software communities
  • Defining rewards for participating in and contributing to these communities
  • Setting up a general framework for the company’s use of free software

Bonewald is committed to raising the maturity of free software: making open source communities and their products stronger. A number of maturity models have been developed over the years; Bonewald particularly favors the Maturity Model described in a Wikipedia entry. Among the traits that go into maturity are accountability, the stability of contributors and maintenance, the availability of support, security checks, and collecting metrics to support all those traits.

For about the past year, Bonewald has also been creating a platform called IEEE SA OPEN (which I also worked on), explaining that open source communities have a lot to learn from standards development. In general, she says, projects should find a large entity to ensure basic legal, financial, and marketing functions. This role is played by well-known organizations such as the Apache Foundation, the Eclipse Foundation, the Linux Foundation, and the GNU project’s Savannah.

As with any discipline, open source software also gives rise to businesses that train and support new professionals. The Linux Professional Institute (LPI) itself, which is a non-profit, demonstrates the value that can be derived from vendor-neutral certification programs. Many companies also offer training and certification, such as LPI partner CLA Linux Institute (web site in Spanish), whose courses exclusively focus on open source technologies. The CLA Linux Institute operates in several companies, and currently online.

The Brazilian company 4Linux (website in Portuguese) concentrates on courses about open source software, specializing in innovative, engaging educational methods and materials for youths. For instance, they use manga in their materials. Managers at 4Linux created the educational graphic novel Hackerteen (which I edited).

4Linux led the first initiative to bring certifications for free and open source software into Brazil, by establishing LPI testing there. They can also boast of being the first company in the world to offer an online course on Linux (in 2002). They have done more coding in the past, and currently offer testing and bug fixing.

As with Cygnus and Red Hat, 4Linux has made money through integration and support. They installed Debian GNU/Linux systems throughout the Brazilian government’s official bank, Caixa Econômica Federal. The bank runs Debian, with 4Linux support, on more than 100.000 ATMs and other embedded appliances where users can play the lottery and pay bills. In addition to government, 4Linux finds interest in open source among start-ups and tech-based enterprises.


Open source has proven itself to be not only sustainable, but critical to modern life. The hot new software projects–such as in big data, artificial intelligence, and cryptography–come out as open source. Even in the cloud, most offerings in these cutting-edge areas are open source–and the users like it that way, because they know they can safely learn the technologies without being locked in to a particular cloud vendor.

When asked for comment on this article Donna Benjamin, Engagement Lead of Open Innovation Labs at Red Hat Asia Pacific Pty Ltd, wrote, “To me, Open Business describes an ecosystem in constant evolution. In healthy ecosystems, many organisms cohabitate and rely on common resources to survive.” She adds, “There used to be a lot of discussion on the business model of open source. We seem to hear that less often now.  Service, support, and subscriptions have proven to be sustainable sources of income for businesses, and for free software developers.”

The biggest computing companies–IBM, Intel, Microsoft, Oracle, and so forth–are producing and maintaining free software. For these companies, free software supports their proprietary activities. Along the way, they provide solid employment to thousands of professionals who can live out their ideal as free software programmers. 

But as this article has shown, businesses can also make money while restricting themselves to open source. Many clients want free software, and will pay to have you develop it. Money can also be made nurturing the community and activities that open source draws on.

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About Andrew Oram:

Andy is a writer and editor in the computer field. His editorial projects at O'Reilly Media ranged from a legal guide covering intellectual property to a graphic novel about teenage hackers. Andy also writes often on health IT, on policy issues related to the Internet, and on trends affecting technical innovation and its effects on society. Print publications where his work has appeared include The Economist, Communications of the ACM, Copyright World, the Journal of Information Technology & Politics, Vanguardia Dossier, and Internet Law and Business. Conferences where he has presented talks include O'Reilly's Open Source Convention, FISL (Brazil), FOSDEM (Brussels), DebConf, and LibrePlanet. Andy participates in the Association for Computing Machinery's policy organization, USTPC.

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