Nothing Good Is Free: How Linux and Open Source Companies Make Money

We all know how popular and helpful Linux and open source products are, but since most of them are available for free, how do the companies that produce them make any money to pay their bills? As it turns out, lots of ways.

We all know how popular and helpful Linux and open source products are, but since most of them are available for free, how do the companies that produce them make any money to pay their bills? As it turns out, lots of ways. Last week's article on Linux for older hardware set a new record for Linux-related articles, in that I did not get even one threatening letter. I did, however, get a bunch of email asking business-related questions about Linux and open source.

A reader named Hermann sent me a comment that serves as a good starting point: "I don't see how these Linux and open source companies can afford to make good software and still make it free." Hermann has a point, but it turns out there are a lot of ways to make money from free software. Let's start with the issue of demand. The more specialized a type of software is, the fewer users there will be. Generally, the fewer users, the smaller the market opportunity. The smaller the market opportunity, the fewer the number of companies that will invest in developing applications of that type.

There's actually a bit of a bell curve in the demand/developer ratio for commercial products. Usage areas with very few users have very few developers who are willing to invest. But applications like office suites, which are dominated by a few incredibly powerful players, also have very few companies creating them (although they tend to spawn substantial aftermarket ecosystems of add-on products). In the middle, there are a great many commercial software companies developing software for a wide variety of needs. In some cases, smaller total available market means lower revenue...