The open-source concept had its genesis back in 1998 but it has seen major growth over the past decade. Today, open-source is increasingly becoming a standard in software development and proving itself to be a viable business model. It might seem counterintuitive that making source code available to all with the ability to modify and redistribute can turn out to be a profitable business model. But the success of Red Hat and its acquisition by IBM for a whopping $34 billion illustrates the seriousness of the world towards the open-source business model.

There are tons of benefits associated with open-source software that have made software development undergo a major change from being a fully closed software process to an open-source business model. To highlight more about the worldwide growth of open source, this blog presents some of the key shining aspects of the open-source business model.

The Open-Source Community

While host companies of open source software maintain control of the software, it’s the open-source community that plays a key role in the ongoing development and scaling of open-source software. The community discovers the software, downloads it, tests it, and then contributes new code in order to turn that open source project into a better version for others. 

You can consider the open-source community as a project manager as it highlights the shortcomings and bugs, asks for improvements or enhancements, etc. If the host company of the open-source software responds actively to the community’s suggestions, then it encourages the software’s broader use with the capabilities and features that users want. Beyond that, the community is also a free source of marketing, promoting the software to the masses. In short, the open-source community is the main driving force behind any open source project.

Virtues of Open Source Software

The business model of open-source software is different from that of traditional closed-source software. With closed-source software, the company generates revenue by charging a high price per unit. But in the case of open-source software, the company cannot ask users to pay a high price per unit because it does not make sense to ask a hefty amount when most of the software’s main capabilities are available for free. So, open-source software is available at a lower unit price but the large audience and market size make up for the negative financial impact of low rates. In other words, cheaper software attracts more buyers than do costly ones. 

Another quality of open source software is an efficient go-to-market approach. Most of the users/developers who are testing the software are already the “customers” of that company without paying for anything. This means an open-source software company doesn’t have to spend much on marketing pitch and can even bypass the initial proof-of-concept stage that accompanies many commercial software procurements. The sales statement can be turned into something like “elevate your capabilities with the software by these additional features with the Pro/Enterprise edition”. In short, marketing expenses are reduced and the return on investment becomes much faster. 

Benefits of Open Source Business Model

The open-source business model is showing promising growth potential and many other benefits for software firms. The top 5 benefits include:

  1. Better Quality

Compared to closed source licensed software, open-source software can actually turn out to be more high-quality and efficient software. The main contributing factor in the quality is the open-source community. Hundreds of developers are putting their expertise, efforts, and talent into optimizing different parts of the software and ensuring the product is always in its best form. 

  1. Enhanced Security

There is a misconception that open-source software is more vulnerable to security threats as the source code is accessible to everyone. But in reality, making source code accessible makes the software more secure. When hundreds of users are working and testing the software, they can more easily identify vulnerabilities and take remedial actions immediately. In short, the source code transparency makes it difficult for attackers to find security loopholes as any security bugs get fixed quickly.

  1. Financially Supportive

As discussed above, open-source software reduces a company’s expenses associated with marketing and maintenance. Even the enhancements and bug fixes come from outside, so the software capabilities expand at no extra cost. Compared to closed-source software, open-source software definitely provides a financial advantage.

  1. Responsive

When there are hundreds of active developers testing the open-source software, the software becomes very responsive with regard to bug fixes and updates. New features are available for users to test during the development phase, making it faster to test and adopt new versions.

Final Thoughts

The open-source market is promising an exceptional growth potential whether it’s due to the massive supporting community, cost-effectiveness, quick bug fixes, better security, faster features update, and other similar factors. In the future, we can foresee even more involvement from big tech giants in the open-source market, while new tech startups are also expected to actively step into the market with the open-source business model.

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