Property rights are the bedrock of modern capitalism. If there is something which one has produced, one has the right to control how it is used by others. One should be able to commercialise it. This extends to intellectual property rights.

Bill Gates in the early days of Microsoft had voiced his opposition to open source software. (Basically software which can be used by anyone without offering anything in return). But in 2018 Microsoft acquired Github, an open source collaboration platform for 7.5 Billion in Stock.

This, if not anything symbolised the rise of Open Source software development and open source business model.

Today, software and other related projects are so complex and gigantum that it is beyond a private company to accomplish everything by itself. So software developers across the board from individual hobbyists to large companies collaborate by sharing codes and improving on it.

99% of Fortune 500 Companies use Open Source. All major tech companies are contributing heavily to open source like  Facebook, Amazon, Google etc.

Open Source business is like the Freemium Business Model money can be made by providing addon, support services, subscription and/or commercial versions of the software. 

Only difference between open source and freemium is that in open source the free version is built and in part maintained by volunteers rather than any commercial entity. These developers are part of an open community. Open source business is mostly prevalent in the software field. 

The Linux operating system was one of the largest open source projects. In 2008, Google launched the Android Mobile operating system which ran on a modified version of Linux.  

Open Source software depends upon a large volunteer community of developers to maintain the software.  

One of the important drivers of open source adoption by large companies is because the amount of code or work required for modern day application became overwhelming for any single company/organization to do it on its own. In a modern luxury car there are more lines of code than an F 15 fighter jet.

There was a need for a central repository where developers could collaborate on these projects. In 2008, Github started which standardized the way developers could contribute and collaborate. This led to an explosion in open source activity. 

Developers from almost all large tech companies are contributing to open source platforms like Github. 

Redhat founded in 1993, was the first one to figure out the successful business model. The basic operating software by Redhat is free, but if businesses want technical support and greater security they need to pay. 

IBM acquired Redhat for $ 34 billion in 2019. In 2018, Microsoft acquired Github for $ 7.5 Billion in stock. Microsoft will be able to sell its developer tools and services to 28 million developers on Github.


Get articles about Finance, Business models, Investing, Economics and policy issues delivered every alternate day directly on Whatsapp. Subscribe here.