Pricing the open source software
It can be free, but there's a little bit more to that.
TL;DR
I’ve grown fond of open source gradually
Commercial open source software (COSS) is a great business model
COSS pricing is complex and deserves the research
I will do this research and write about it in this Substack
This post explains my motives
I’m building open source revenue intelligence tooling (github | website)
Why I love open source software
Like most people, I was frequently using open source software without even knowing about it.
It's hard to find an app that does not use OS tech. Makes perfect sense – why build boilerplate if you can just take something that's good and free? (And being free means people tend to work on it out of altruism, which makes it even better over time!)
In university, I started to work in tech and began to use open source directly. My path is not the most obvious one as I am not an engineer by training or career, but a BSc in Management with product titles. Usually I queried databases like MariaDB, PostgreSQL or ClickHouse or building charts in Metabase, Superset or PostHog.
But it's not only software – sometimes it is also about data. A great example of an OS dataset is OpenStreetMap. I'd bet all mapping companies use some or all components of it. So did we at Maaaps – OSM data helped us backfill barangays (Filipino city districts), cities, regions and country for 0.5M addresses our field mappers collected.
Still, I kept thinking of open source as lacking a viable business model. Then I got into blockchain. Ethereum ecosystem blew my mind – everything is open source yet companies earn money that's enough to pay devs 20-100% more.
It took me until 2023 to dive into commercial open source software (COSS). Turns out it's a great business and a ton of great tools (usually built for people who can use Docker).
Is COSS even good at making money?
Short answer is "Yes". Just check out earnings reports of GitLab, MariaDB, MongoDB et al; their name is legion.
One of the things I love about software is pricing and economic innovations. It's an elegant way to make more money just by thinking hard about positioning and product bundles. Kudos to Reforge and Elena Verna for their Monetization & Pricing course that changed how I think about this.
Uber gave us surge pricing, Salesforce paved the way for SaaS, and more companies are moving to usage- (and even outcome-) based pricing models. Folks are relentlessly testing how, when, and what to charge their customers for.
It's a constant push towards not racing to the bottom in a price war, but making sure everyone pays exactly the maximum they're ready for. I respect humongous intellectual effort but suffer its consequences every month (ha-ha!).
In that sense, commercial open source is a boss move. These people are ready to give out their products for $0. The power of free is a kneecap to the competition. It's also a textbook example of disruptive innovation where companies start by capturing the worst customers and go upmarket as their products mature.
When you build COSS, you trade first-mover advantages for lack of market risk and killer pricing proposition. On top of that, you make a public good (though it depends on your license). It feels too good to be true to me, so I started diving deeper.
Findings
Turns out, COSS pricing is way more complex than pricing of proprietary software. I will forget it without writing it down.
So, I will turn my learnings into a series of articles – pricing teardowns of popular open source SaaS + an overview of common pricing methods & tactics. I start it with Metabase pricing teardown.
This post will be updated as I post new articles. I will also provide relevant links from other authors as I find them.