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 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).
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 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.
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.
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.
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.”
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.
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.
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.
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?