The open source business model is the answer to an awkward question: if anyone may freely copy, modify, and redistribute the software, how does the company that builds it earn a living? Over time, several distinct strategies emerged, and the history of open source companies is in large part the history of trying these models, mixing them, and occasionally abandoning them.
The earliest and best-known approach is support and subscriptions. The software is open and free to copy, but customers pay for a relationship: tested and certified releases, security updates over a guaranteed support window, and expert help when something breaks. Red Hat is the canonical example, and it described exactly this kind of business when it filed to go public. Its 1999 S-1 registration statement with the SEC laid out a company built around open source software and the services and subscriptions sold on top of it, while frankly noting the risks of relying on software the company did not exclusively own. Canonical follows the same pattern with Ubuntu, giving the software away and selling its Ubuntu Pro subscription for “security maintenance, support and compliance features.”
A second model is open core. Here a freely licensed core product is surrounded by proprietary add-ons, typically enterprise features such as advanced security, management, or scalability tooling, that are sold under a commercial license. The open core attracts users and builds a community; the proprietary shell is where the revenue lives. The risk is in drawing the line: put too much in the paid tier and the open product looks crippled; put too little and there is nothing to sell.
A third model is dual licensing, in which the same code is offered under two different licenses at once, typically a strong copyleft license such as the GPL for the free community version and a separate commercial license for companies that want to embed the software without copyleft obligations. This works best when a single entity owns the copyright to all the code and so has the right to relicense it. MySQL was the textbook case, selling commercial licenses to vendors who could not or would not comply with the GPL.
A fourth model, dominant in the cloud era, is hosted software as a service (SaaS). Instead of selling licenses or support, the company runs the open source software for customers and charges for the convenience, operation, and scale of the hosted offering. This model created the sharpest tension in open source economics, because it also let large cloud providers take a popular open source project, host it as a paid service, and capture much of the revenue without doing the development. That tension is precisely what has driven a wave of license changes, with projects moving from established open source licenses to “source available” or restricted licenses designed to stop cloud providers from reselling them, often at the cost of no longer meeting the Open Source Definition.
Taken together, these models show that open source and commercial success are not opposites, but the relationship is unstable. Each model trades away some control or some revenue in exchange for the adoption, trust, and contribution that openness brings, and when a competitor finds a way to capture that value without sharing the cost, the company that wrote the code is repeatedly tempted to tighten the license. The result is a continuing argument, running from Red Hat’s IPO to the SaaS license wars, over what it really means to build a business on software that anyone is free to use.