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This is the money being made TODAY in Open Source

There is a lot of money being made in Open Source, although the profitable companies are not always the ones you would expect.

While many companies don’t disclose detailed financial information we have dug around to find numbers for some well-known open source companies and projects to see how they are doing financially.

We start with perhaps the most famous of them all…

Mozilla

Mozilla has the famous Firefox web browser and the Thunderbird email client. In 2006 the Mozilla Corporation generated $66.8 million in revenue with 85% of the revenue coming from Google for being the default search engine and ads placed on search result pages. Google and Mozilla recently extended the deal to 2011 (just before Google launched Chrome, ironically).

Sources: Wikipedia, TechCrunch.

Canonical

Ubuntu Linux is hugely popular, but it actually isn’t profitable. At least not yet. Canonical is the company behind Ubuntu. It was founded by Mark Shuttleworth who previously founded Thawte, which he sold for about $575 million, some of which he is now using to fund Canonical. Shuttleworth recently went on record saying that Canonical is not yet cash-flow positive but that he is happy to keep funding it for another three to five years.

Source: The Guardian.

Alfresco

Alfresco is an open source alternative for enterprise content management. The company has received a total of $19 million in venture capital. According to the founder and CEO, John Powell, the company is heading towards profitability and an annual run rate of $10 million in revenue. Powell also believes that Alfresco will be able to go public in 2009.

Source: Venturebeat.

Novell

Novell is a software development company that holds open source projects such as openSUSE Linux in addition to their closed software. Novell’s yearly revenue outlook for 2008 is expected to be between $940 and $970 million. Their SUSE Linux Enterprise sales rose 65% to $28 million in the first quarter of 2008.

Source: CNET.

Funambol

Funambol is an open source mobile synchronization server described as “Mobile 2.0” that is offering its product for free to enterprises and instead gets its revenue from service providers. They have received a total of $25 million in funding and are cash-flow positive. Funambol may go public in the future.

Sources: TechCrunch, CNET.

Sun Microsystems

Sun offers both hardware and software but is known for its open source software such as Java, Star Office, OpenSolaris and lately its huge acquisition of MySQL.
It is difficult to isolate what kind of money Sun is making off open source since it is such a large company, but MySQL’s revenue was around $50 million in 2006, and it was not losing money.

Sun’s CEO, Jonathan Schwartz, has said, “Looking forward, we remain confident in open source innovation as the accelerant to our growth strategy through increased adoption of our open source offerings.”

Sources: Ostatic, CNET.

Red Hat

Red Hat is an open source software company with the Red Hat Enterprise Linux distribution and software such as JBOSS. In the first quarter of the fiscal year 2009, Red Hat pulled in $156.6 million, an increase of 32% compared to the previous year, and had $491.8 million in deferred revenue.

Source: CNET.

Yahoo

Yahoo is most famous for its search engine and Web 2.0 services such as Flickr, although it holds open source projects such as the groupware software Zimbra which it bought in 2007 for $350 million. Zimbra had about $20 million in bookings before the acquisition.

Source: CNET.

SugarCRM

SugarCRM is an open source CRM system which has received $41 million in funding. Their annual revenue for 2007 was about $15 million and they where cash-flow positive.

Sources: TechCrunch, MSPmentor.

Nokia

Nokia wasn’t known as an open source company until they acquired Trolltech, the makers of the Qt graphical user interface framework used in for example KDE. Trolltech went public in 2006 and was bought by Nokia in 2008 for about $104 million. Their revenue was then about €25 million with total losses around €6 million for the last couple of years.

Source: KDE Developers.

Open Source as a business model

It has long been debated whether going Open Source is a viable commercial business model, and truth be told, no one really knows what will happen in the long run. However, the billion-dollar acquisition of MySQL by Sun and Nokia’s purchase of Trolltech indicate that commercial open source is serious business.

There are obviously a number of different ways to earn money on open source software. Some of the ways that are currently being pursued are:

  • Offering an enterprise version in addition to a free open source alternative.
  • Offering technical support.
  • Offering commercial extensions to open source software.
  • Using open source software to attract customers to other commercial products by the same company. This is one of the reasons why buying popular open source projects can be an attractive proposition to large companies.
  • Subscriptions for online accounts and services.

Then of course there is the cash-infusion that an IPO can bring, although that really can’t be considered a business model.

The time when open source was all about collaboration and freedom, and money was of no interest (and almost a bad word), now seems to be a thing of the past. Today it is possible to run a large corporation focused completely on open source. Some companies, such as Red Hat, have been doing this successfully for years.

One can only expect that open source will keep growing and that the commercial aspect of it will be getting more and more attention. That even Microsoft has open source projects today seems to be proof enough.

What are your predictions?



14 Comments

I didn’t know Redhat was making T H A T much money. Good for them.

I read somewhere that open-source alternatives may even get an upswing now that a recession is on the way (already here, I guess). Tightening the belt and all that.

@Luthor: Thanks for commenting. Red Hat no doubt was one of the first ones (maybe even the first?) to truly make Linux and open source commercially viable.

As you indicate, it will be interesting to see what kind of an effect the recession/financial crisis will have on this business model. Good or bad?

Interesting. But to be honest, isn’t this like peanuts next to the revenues of other software companies.

I have no doubt that open source is a viable business model and that it will grow to be even bigger, but closed source companies will always be bigger.

@Ebrahim: Oops. Thanks for the catch. Fixed.

Hi,
I have not been able to find comparable information for Compiere, which I saw as a skyrocketing software/company.
Does someone have more chance than me?

Consulting services for open source products are probably the biggest money earners in the open sorce world.
This however doesn’t show up so often on the radar because this isn’t an exciting business model. The revenues are spread out among many smaller companies but taken together add up to a lot.

Remains to be seen if pure-play Open Source software companies will be as successful as their proprietary counterparts. I read from CNET in Matt Asay’s (of Alfresco) blog that low conversion rates (as low as 1%) from free downloads to paying customers is not uncommon. One thing is for sure–they are disrupting the market, helping keep the big vendors honest, and offering customers choice. In the long run perhaps the real money that will be made is not from subscription fees or support services for open source code but from savings made in R&D, marketing, testing and QA by leveraging a wider community of users and sharing knowledge embedded in software code.

There is a magic “Tipping Point” where use of open source will suddenly spill over and convert the larger portion of Microsoft$ users. Vista brought that tipping point eons ahead, and the next big fiasco from the bloated giant is about to do the same! Please donate your old boxes to a church-group or some needy student in these hard times! To comply with the law, and with Microsoft’s leasing policy, you can now replace Microsoft OS with the free (download from the net) Ubuntu OS, which can be set to erase the hard drive of all traces of the “illegal to give away ” Microsoft system and your private information, before donation! Now, explain to your lucky recipient that all the manuals they will ever need are available for free on the internet! Just ask for them in Google! OpenOffice, which is installed already is plenty adequate for homework assignments and with a little exploring, everything else can work well too! Happy computing!

For the record, Alfresco is doing much more than the amount noted above. Multiples of it.