OSS Business Models

Open source is a strategic business model, not foregone revenue

Open Source Software (OSS) is far more than free software. It is a strategic instrument for establishing market presence, attracting talent, and defining industry standards. Companies need clear business models and an internal governance body (the Open Source Program Office, OSPO) to fully unlock the potential of OSS.

Successful strategies use OSS to solve commodity problems collaboratively, while building their own differentiating value on top of those standards.

Anti-Patterns: The Naive Approach to OSS

• Free Rider Mentality: Consuming only, without giving back. This leads to technical isolation and prevents any influence over the roadmap of the software being used.
• Licence Blindness: Unplanned use of copyleft licences (such as GPL), which can unintentionally result in the disclosure of proprietary core code.
• No Strategy: There is no clear policy governing which internal developments may be published and which must remain protected.

Strategic Professionalisation

1. OSS Business Models:
   • Open Core: The core is free; specific enterprise features (security, management) are paid.
   • SaaS / Managed Hosting: The software is free; comfortable and secure operations are sold as a service.
   • Professional Services: Consulting, implementation, and support for complex OSS ecosystems.
2. The OSPO (Open Source Program Office): A central body that coordinates OSS strategy, ensures compliance, and maintains relationships with communities.
3. Upstream Contribution: Targeted participation in those projects on which the company is strategically dependent, to secure their quality and security.
4. Talent Magnet: Publishing high-quality code as proof-of-work to attract highly qualified engineers.

The Focus: Ecosystem Control

By initiating an OSS project, a company can set a de facto standard and secure a central market position (e.g., Google with Kubernetes or HashiCorp with Terraform).

FAQ

Why should we pay for the development of software that we then give away?

Because this approach shares development costs with other market participants, defines the standard, and attracts excellent engineers who enjoy working on open source.

How do we prevent legal risks from open source licences?

Through automated licence scans in the CI/CD pipeline and clear guidelines from the OSPO specifying which licences are approved for which purposes.

References

• TODO Group OSPO Mind Map. An overview of the tasks of an Open Source Program Office. (2021). ospomindmap.todogroup.org/
• Karl Fogel Producing Open Source Software. On leading open-source projects. (2005). producingoss.com
• OSS Capital Open Source Business Models. An analysis of various monetisation strategies. (2019). oss.capital