Open Core
Open core is a business model for monetizing open source software. Open core companies provide an open source core product and a commercial, source-available premium product.
📹 Watch Sid’s full presentation on Commercial Open Source Business Models
Open core is a hybrid software development and licensing model that includes open source and proprietary software. It typically consists of an open source core with proprietary features and functionality built around it. The open core model provides a path for commercializing open source projects. All of the code is source-available, allowing everyone to contribute to the whole, but you must pay to use certain parts of the software. An open core company must have proprietary intellectual property to monetize.
Open core leverages an existing open source project and builds a commercial version with proprietary features around it. Think of the open source core as a distribution and R&D strategy, and the commercial, proprietary features as a monetization arm. Software companies that meet the following three criteria are generally considered open core.
Open core is not a support and services model. Support and services-based COSS companies (Red Hat) only produce open source code but charge subscriptions for support, training, and implementation services. OCV does not start support and services-based COSS companies.
Advantages of open core
Commercial open source software companies tend to outperform closed-source software companies. Companies built around open source software raise more money, faster, and at higher valuations than solely proprietary software companies. They benefit from early signals of product-market fit, faster research and development cycles, and greater user trust.
Open core is a sustainability model for open source
Open source software underpins modern software, but the industry’s lack of monetary support for creators and contributors has created a sustainability problem. As a project grows in popularity, many maintainers find they can’t support the “weight” of support, feature, security, and other requests.
As projects become more popular, a cycle of growth emerges:
OSS creators/maintainers make something awesome
Early adopters arrive and contribute, work with minimal documentation, and help the project out
Late adopters come on the scene but are less likely to contribute, expect better docs, are more likely to ask questions
Mainstream adopters show up and expect backward compatibility, consistent performance, security, and requested features to be present
For successful projects, the software lifecycle represents an increasing level of time and effort. Almost all successful projects will feel this pain. How they react is the difference between happy maintainers and burnout, and the line between sustainable and unsustainable software. At OCV, we think open core will be the most common way to make open source projects sustainable.
Open core concerns
Some people believe the open core model exploits open source. We believe open core is a way to sustain open source by allowing passionate creators to monetize their efforts. Open source users benefit when a company backs an open source project via an open core business model because dedicated resources are allocated toward supporting the open source version. Contributors can get paid to work on the project.
A common concern is that open core companies are competing against themselves. In our experience, the opposite happens: Developing an open source version of the product accelerates adoption and acts as an on-ramp to the paid version.
There is a risk of increased piracy when making proprietary code source available. The risk is generally low and outweighed by the community contributions and customer trust you will receive in exchange for providing access to the code. Those willing to pirate software are unlikely to pay for software regardless. Most companies do not pirate software.
Open core companies do face the risk of service-wrapping from the hyper clouds. Freedom to create and compete is part of the open source ethos. An open core company indeed opens itself to more competitive risk than a closed-source product. The benefit of building with open source is innovation speed and the tradeoff is allowing direct competition. In the end, the users determine which product is best. The best way to manage this risk includes developing application software and adopting a buyer-based pricing model.
Origins of open core
Andrew Lampitt coined the term in 2008 after he noticed there was confusion in the industry around dual licensing strategies, and as a result, they were getting a bad rap due to what was perceived as bait-and-switch tactics. The problem, he argued, was that dual licensing doesn’t accurately describe the approach as an emerging business model. Open core does not claim to be open source—it is a business model that builds alongside an open source project.
Last updated
Was this helpful?