Monetizing Open Source Software Is Still Hard

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Some weeks ago the guys behind LocomotiveCMS – an open source CMS that’s competing with WordPress – published a sobering article on
how they failed making a profit with open source software so far.

Their model basically relies on building reputation from their open source work and benefit from community contributions to their software. Their revenue is generated from both doing consulting for LocomotiveCMS and selling hosting services in a SaaS package. Not too unusual a model. The harsh reality – however – is this: Didier, their only developer, spends 2.5 days per week on consulting to pay the bills, 2.5 days on maintenance and another day on the next product version, with him contributing almost all of the code and hardly any contributions from the community.

This pace doesn’t seems sustainable both from a product development point of view and a sound work culture perspective.

There a few interesting tidbits in the article, one of which is this:

“I remember that when we launched LocomotiveHosting and presented our sales forecasts to our banker, Didier made me lower by projections several times. I thought to myself: “how hard can it be to gain one client per day on a personal plan?”

Now I’ve got my answer. I found it way more difficult to acquire a $19/month SaaS client than a $1100/day consulting client.”

Now, this obviously isn’t something that’s restricted to open source software but rather is a problem every software company faces which tries to think beyond billable hours. Nonetheless, it gives rise to the question if a sustainable, reproducible revenue model is even possible for open source software. It’s difficult enough to create a sustainable, lasting business based on consulting alone. Having to develop a product alongside basically for free or rather just for creating a good reputation doesn’t exactly make things easier.

This got me thinking: Red Hat and WordPress are common examples of companies that managed to build successful business upon an open source model. However, considering the above, they more seem like outliers than the norm. Other than from those two, most open source contributions by commercial entities come from large companies that both benefit from open source to a large extent and can afford to contribute without directly regarding revenues. The likes of Oracle, IBM and Google come to mind. Sure, there are other companies with a successful open source business model such as Ubuntu but those are few and far between and they tend to be small and also stay that way in most cases.

This could be a problem for open source software and by extension pretty much all of modern software development, which heavily relies on open source software. I’m pretty sure that if it wasn’t for open source software we wouldn’t have had this tremendous growth in software development and computing in the last decades and we certainly wouldn’t have people talking about software eating the world.

I find this at least a little bit worrying. It’s certainly great that so many developers around the world love to contribute software for free that helps others with creating great products or doing a better job. However, if a software developer can’t make a living on this or a small software development company can’t create a sustainable business around open source that’s clearly worrying. Most developers have to make a living on creating software and given the current situation they’re more likely than not doing so by developing closed source software for others.

Figuring out a reproducible open source business model could spur open source software development and contribute a lot to both commercial and non-profit enterprises.

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