Many companies build their revenue on software that anyone can download, modify and redistribute. It is not a contradiction: the value they sell rarely coincides with the code itself. Understanding which business model sits behind an open source product matters to adopters, because the model determines what will stay free, which features might become paid and how likely a future license change is.
Open core
In the open core model there is a base version of the product released under an open source license, and one or more commercial editions with extra features under a proprietary license.
The features reserved for the paid edition are often those that mostly interest large organisations:
- centralised authentication and advanced role management;
- detailed audit logs;
- high availability and replication across sites;
- compliance and reporting tools;
- support with guaranteed response times.
The delicate part is the boundary. If the free version is complete enough for real use, the model works and the community stays active. If the company gradually moves essential features into the commercial edition, the free version becomes a demo and outside contributors lose interest, because they do not want to work for free on a product others are selling.
Another practical effect: in an open core project, outside contributions that duplicate a paid feature may be rejected, even if technically sound.
Dual licensing
The code is offered under two alternative licenses: a strong copyleft one, often GPL or AGPL, and a commercial one. Those who accept the copyleft obligations use the software freely; those who want to embed it in a proprietary product without releasing their own code buy the commercial license.
This model requires the company to hold all rights to the code, so it usually asks contributors for a CLA that allows relicensing. For users who comply with the copyleft nothing changes; for those distributing closed products it is a cost to plan for.
Managed service
The company publishes the software under an open source license and makes money by offering it as a hosted service: installation, updates, backups, scaling and monitoring are its responsibility. Anyone who wants to can install it themselves; those who would rather not deal with it pay a subscription.
It is the model most compatible with an open community, but it has a known weak spot: large cloud providers can offer the same software as a service without contributing. This very tension has pushed several companies to move to source-available licenses that forbid offering the product as a competing service.
Support and professional services
The oldest model: the software is entirely free and the company sells support subscriptions, certifications, training, consulting and long-term maintenance guarantees. Commercial Linux distributions are the best-known example.
The advantage for users is maximal: nothing is held back. The limit for the company is that margins depend on people, and growing means hiring proportionally.
Comparing the models
| Model | What stays free | Risk for users | Relationship with contributors |
|---|---|---|---|
| Open core | The core | Features moved into the paid edition | Strained if the boundary shifts |
| Dual licensing | Everything, under copyleft | Cost for those shipping closed products | CLA required |
| Managed service | Everything | License change to fend off competitors | Good |
| Support and services | Everything | Low | Good |
How to assess a product before adopting it
A few practical questions help you understand what you are building on:
- What is the exact license of the free version, and does it cover the whole repository or only some folders?
- Which features are reserved for the commercial edition, and will you need them?
- Do contributors have to sign a CLA that allows a license change?
- Has the company changed licenses on other products in the past?
- Are there forks or community alternatives in case conditions worsen?
In my work, when a client has to choose between two similar products, a table with these five answers often carries more weight than a feature comparison.
In short
- Open source companies rarely sell the code: they sell extra features, licenses, services or support.
- Open core works as long as the free version remains genuinely useful.
- Dual licensing requires the company to hold all rights, usually through a CLA.
- The managed service model is open but exposed to competition from large cloud providers.
- Before adopting a product, check the license, reserved features, CLA and the company's track record.
