In class this week, we discussed the role of open source in business. This is particularly interesting to me, as I like to think about business strategies and we’re all beneficiaries of open source. The most interesting discussion to me was around open source and business models.

A large part of the discussion around open source and business models centers around the question of whether open source is a business model or not. My takeaway is that open source isn’t a business model (or not a good one at least), but business models can center around open source. For example, Red Hat captured value not by “selling” open-source software, but by selling services for open-source software. It happens that Red Hat created most of the value it captured by being champions of the open-source software it sold services for, but open-source software in isolation is not a business model.

This is also the case for other business models, like the open-core model, where open-source software is used as a vehicle to build communities around and drive adoption of software that makes money from add-ons. This model has analogs outside of open-source software. For example, mobile games are often free to build a large playerbase and make money off of selling cosmetics or other add-ons.

Ultimately, I think that open-source can be a core part of a good business model, but isn’t a good business model by itself. It’s useful in getting adoption, but by nature of being free, it is hard to monetize without other strategies.