Can you make money from open-source projects? When everything is available for everyone to see, can this work as a business? It's nice if it's a hobby, a cute little side project to show off your expertise, or to keep you motivated when your job bores you to death. But is it a viable business model?

You would say yes if you follow the Build in Public trend. Other indicators that open-source is for more than just hobby projects is the transparency and permissionless baked into the blockchain. And then, finally, there is OSSCapital, a fund investing in open-source software. But even OSS backs commercial open-source software products. There is money to be made from opening the doors and letting your competitors snuff around.

The thought of opening up has been steering in my mind since the fantastic Builders talk Building A Business in Open Tech organized by Joey from Backdrop.

What is open source?

Open source is telling others how you have created something. It's sharing your methods. It's like if you invite your friends to dinner and cook a succulent empanada dish based on a family recipe passed down for generations. And you give that recipe away on a fancy invitation card so your friends can recreate your family tradition whenever they want, without you having to cook it for them. That's open-source licensing. Allowing others to use your output (the recipe). But, as everyone who cooks knows very well, following a recipe doesn't mean that the result tastes precisely the same. Depending on your open-source license, you might charge your friends for support to get the dish to be an exact replicate of the original, or you can help them for free. You can also give them the right to modify the recipe and sell this revised version in a restaurant or forbid it.

Open source is most often associated with software. This may be because of how the internet started, among academics, as a way to collaborate. Hiding stuff hinders collaboration, so let's put it all out in the open.

Talking about academia, open source is still a thing in academia. Over the past ten years, there has been a resurgence in making "open source" more transparent: Sharing data in repos freely accessible to all and revolting against the massive paywall scientific publishers erect around their journals. Do you know that academics can lose access to their own publication if their employer doesn't have a license for accessing the journal in which they published? Of course, they have the final version, but that is beside the point. Do you want to publish open access? Pay up, typically several thousands of euros.

But this post isn't about how academic publishing is broken and drove me into the welcoming arms of Web3.

Let's open the doors and share our secrets!

A fictional dialog between two founders building a product together:

Co-Founder 1 (with terror in the voice): "We can't put this in Notion! Our Notion is public and accessible to everyone who wants to see it!"

Co-Founder 2: "Go for it," they counter. "It takes me ages to find something in our messy Notion. Competitors aren't going to take the time to research our Notion, follow dead links, and reverse engineer what we are doing."

Co-Founder 1: "But, but, but this is strategic information. They could copy it."

Co-Founder 2: "There is nothing new under the sun"

Suppose there is nothing new under the sun, and collaboration and open systems are cornerstones for innovation and creativity. What's holding people back from using an open-source model? Of course, beyond fear, the ultimate human driver to be suspicious of fellow humans.

The foundation of all doing is education. If you don't know something is possible, you don't know it. Do you know you don't have to go to an office to do your task? Do you know that you can travel the world 365 days a year, even when you have kids? Do you know that sending kids to school isn't the only way for them to get an education?

Open source project I'll bet you know about (even if you are not a software developer):

Ever heard about Android? Yes, I mean the operating system on all Google phones and a bunch of others (except, of course, the iPhone and Nokias). The Android operating system is based on a modified Linux kernel. Android Inc. developed its operating system using the Linux pre-build for the Android operating system. They were acquired by Google for $50 million.

The Android version we know of and interact with is open-source and built by Google. No need to discuss the business model here. If you are flush with cash, you can develop things open source. You could also question the ethical origin of building Android as an open-source project.

Google created the Open Handset Alliance, a group of 84 hardware and telecommunication companies to advance innovation in mobile computing. Members of the alliance commit to using and building on...Android. While no money is changing hands for installing the Android operating system, hardware developed to run Android smoothly might not work well with the Windows operating system. Of course, if you have an Android phone, it comes pre-loaded with Google products.

Android isn't the most interesting example of an open-source business model. A big company is behind it, paying for its development. But what about Linux, the framework on which Android is based?

Linux is an open-source Unix-like operating system based on the Linux kernel. A kernel controls everything in your computer. It controls the interaction between the software (e.g., Spotify desktop app) and hardware (your speakers). The kernel decides what process should be running, when, and how much memory to allocate to it.

You find Linux on 96.3% of the top one million web servers. While you might not use Ubuntu or another Linux platform daily, you will notice if servers worldwide are breaking down because the underlying code is broken.

Linux was originally written in 1991 by Linus Torvalds. More than 500 companies contribute to the development of the Linux kernel, among those some big players like Intel, Red Hat, IBM, and Samsung. The Linux wikipedia entry for it is amazingly complete, most probably a side effect of being an open-source project. Nothing to hide here.

Side note: Wikipedia is a community where knowledge is open-source. No need to buy dictionaries. It's also free to use.

Linux comes with a General Public License, v2. That means it can be commercially distributed with or without modifying the source code, but the source code must be made available for free. Distributing Linux takes the form of providing the code for free but charging for support (e.g., Intel, Samsung, Google) or giving the software away for free but charging for the hardware (e.g., Apple until version Mac OS 7.6, released in 1997). That explains how other companies make money from the freely available Linux software, but it doesn't explain how Linux makes money.

The answer is simple: Linux doesn't make money because it isn't owned by anyone, and thus, there is nobody who has to pay developers to maintain it. Or said differently: Linux is owned by everyone, and hence, every company that contributes to its development is paying its employees for their work. Linux is like an urban park everyone owns and can contribute to by planning a new tree, watering the plants, and fixing the benches.

Linux isn't the only repo, aka project on which the online world runs, but it isn't profitable in a commercial way.

Django and React are popular open-source projects for building websites. Django is the framework used by Youtube, Spotify, Instagram and many others, while Netflix, Uber, and AirBnB and many others use React (Facebook initially created and maintained it).

Python packages are open-source, and so are R packages. R is widespread for analytical work. R has an interesting business model: The basic GUI, as is the more advanced and fancier R Studio, is free to use. You can also create shiny dashboards with R that you can run for free on their server.

But for enterprise-level computing power and support, you'll have to pay. It's the Netscape model: Free for individuals but paywalled for companies. Of course, you do not have to pay, but if you want the convenience of the posit solution, then you'll pay. The R-project itself is open source. The R Foundation provides "support for the R project and other innovations in statistical computing." and is financially supported through donations.

But creating a foundation and asking people for donations isn't the only way forward for open-source projects. Spectrum was acquired by GitHub. Spectrum was an open-source community tool combining real-time chat with forums. It started in 2017 and was acquired in 2018.

MySQL is another example of an open-source project acquired by another company. Sun Microsystems paid billions for an open-source database to save its own expensive products. It builds in fancy hooks to entice people to move from the free MySQL database to their paid Oracle database.

Is open-source limited to software projects?

This discussion on open-source is limited to software development. What about other domains?

Do restaurants publish their recipes and cooking methods? How a dish is prepared, the list of ingredients, and the cooking method is a restaurant's source code as it provides instructions to transform a list of specific inputs into outputs. But typically, restaurants don't publish their recipes. It's their trade secret. Some argue that even if they would share it, most people don't have the correct equipment to recreate the dish at home. Sharing or not sharing it, customers would come back to the restaurant.

Another example is artists perfecting a specific technique. They might share it in a paid course (closed source). Here, the sentiment is that, in most cases, how a painting was created is the artist's secret, and divulging that secret will harm the artist. But you can also argue that if it takes years to perfect a technique, sharing how you did something doesn't mean the other person can apply your secret method from day 1 as well as the creator. It takes practice. While practicing this technique, modification will be added, resulting in a different approach with other - potentially better - results.

All this is to say that open-source doesn't mean no financial reward. Most open-source projects remain small. Bigger ones are backed by Foundations and maintained by thousands of people whose employers benefit from further code development. Getting acquired as you offer a free and good-enough solution to enterprise tools is another outcome for these projects. Most logically, you distribute the code for free, but people must pay for support. And, of course, there is the Netscape model, free for all but enterprises or the bundling of open and closed-source projects to create a solution whose convenience outweighs its costs.