Open Source Software: What It Is, How It Works, Why It Matters, and Making Money from It

Introduction

Open source software is everywhere these days. From the Linux servers running your favourite websites to the browser you’re reading this on, open source code is under the hood. But what exactly does “open source” mean, and why do so many developers and companies swear by it? In simple terms, open source software is software whose source code is openly available for anyone to inspect, modify, and distribute. It’s a collaborative approach where developers around the world work together to solve problems and improve the software for everyone’s benefit
In this blog, we’ll break down the what, how, and why of open source software in a friendly, no-nonsense way. We’ll also dive into some important considerations like licensing (yes, those sometimes-confusing licenses really matter!) and even bust the myth that you can’t earn money from open source. By the end, you’ll understand not just what open source is, but also how open source projects thrive, why they’re a big deal for both individuals and organizations, and how developers can make a living in the open-source world. Let’s get started!

The Three Aspects of Open Source Software: What, How, and Why

What is open source software? Open source software is software that comes with permission to use, modify, and share the code. Unlike proprietary software (where the company keeps the code hidden and under strict control), open source projects publish their source code openly and typically license it in a way that anyone can use it. The term “open source” was adopted by the Open Source Initiative (OSI) back in 1998, emphasizing software that is freely accessible and reusable. According to the OSI’s definition, open source software isn’t just about having the code visible – it also grants broad rights like free distribution, the right to make modifications, and no discrimination against any users or fields of endeavour. In other words, if a program is open source, you can download it, run it, learn from it, tweak it to suit your needs, and even share your modified version. This model has produced famous tools and platforms we use daily, from operating systems like Linux to web servers like Apache, and much more.

How does open source development work? Open source development is as much a social process as a technical one. At its heart is the community. Typically, an open source project is hosted in a public repository (for example, on GitHub or GitLab) where anyone can view the code. Developers (whether they’re hobbyists, students, or professionals) can contribute to the project by submitting code changes (pull requests), reporting issues, or improving documentation. A core team of maintainers or project owners usually reviews contributions and manages the direction of the project. The key here is that the project is open to participation. By calling it a “project” rather than a finished “product,” open source creators signal that contributions are welcome, and the software is continually evolving. In fact, one golden rule in open source circles is “never call it a product.” If you present your open source creation as a polished, finished product, people might assume there’s nothing left to do and move on. But calling it a project invites others to join in and help make it better. Successful open source projects like Apache or the Linux kernel thrive on this collaborative ethos – they are community-driven engineering efforts, not a one-man show. Anyone with the interest and skills can jump in, contribute code or ideas, and over time even become a recognized contributor or maintainer. This collaborative development style means bugs get identified and fixed faster, features evolve based on real user needs, and the software can adapt quickly to new challenges. It’s not always perfectly organized, of course – managing an open community has its challenges – but when it works, it’s like having the whole world as your development team!

Why open source? (Benefits and motivations) There are plenty of reasons why developers and organizations choose open source. For individual developers and students, contributing to open source is a fantastic way to learn and improve skills, build a portfolio, and get recognition in the community. Many contribute for the sheer joy of coding and solving problems – it’s a passion and a hobby that also helps others. From the user or organization perspective, one big draw of open source is cost savings. Open source software is usually free to obtain, which can significantly cut down IT expenses compared to buying proprietary licenses. But beyond cost, open source offers transparency and trust – since the code is public, there’s nothing hidden; you (or security experts) can audit the code for vulnerabilities or backdoors, which is reassuring in an era of security concerns. Open source also means no vendor lock-in. You’re not tied to a single vendor’s ecosystem, so if you need to customize the software or migrate to a different solution, you have the freedom to do so.

Another huge benefit is innovation through collaboration. Because anyone can contribute, open source projects often evolve rapidly and incorporate ideas from diverse contributors worldwide. Some of the best and most widely-used software libraries (think of programming frameworks, databases, etc.) are open source, benefitting from thousands of contributors. In fact, open source has become a cornerstone of modern IT infrastructure – from servers to programming languages – because it allows collective problem-solving. Companies have recognized this; as of recent years, around 80% of IT departments planned to increase their use of open-source software, and 95% of IT specialists agreed that open source is strategically important to their organizations. It’s hard to argue with those numbers! Open source software typically achieves high quality and reliability, too. With many eyes on the code, bugs can be spotted and fixed quickly (the famous Linus’s Law states “given enough eyeballs, all bugs are shallow”). And if a particular open source tool doesn’t perfectly fit your needs, you have the flexibility to tweak it – or hire someone to tweak it – since the code is open. This flexibility and control is something proprietary software can’t offer to the same degree.

Finally, let’s not forget the sense of community and shared purpose. Using or contributing to open source means you’re joining a global community of like-minded folks who help each other out. It’s common to find extensive documentation, forums, and chat channels where users and developers interact. The collaborative spirit can be very rewarding – you’re not just a customer of software, you’re a participant in it. All these factors – cost, transparency, flexibility, security, community – explain why open source isn’t just a fringe movement; it’s mainstream and powering critical systems around the world.

Licensing of Open-Source Software

When you decide to open source a project, one of the most important steps is choosing a license for it. An open source license is a legal document that tells others what they can and cannot do with your code. It might sound dry, but licensing is crucial – it protects you as a developer and sets the ground rules for the community using your software.

There isn’t just one “open source license” but rather many options, generally falling into a few categories:

Public Domain or Unlicensed: This is the “do anything you want” approach. You can dedicate your code to the public domain (or use licenses like CC0) so that anyone can use it without any restrictions and without even needing to attribute you. This is very permissive, but be aware it offers you no protections. For example, if something goes wrong, there’s no warranty disclaimer by default, so someone could technically try to hold you responsible (which is why many developers avoid pure public domain for code). Essentially, public domain means you’re saying “I make no claims, it’s out there for the public good.” Great for code snippets and trivial projects, but less common for large projects due to the lack of any liability protection.
Permissive Licenses: These are very popular licenses like MIT, Apache 2.0, and BSD. “Permissive” means they come with minimal requirements – pretty much anyone can use your code in any way, including integrating it into proprietary (closed-source) projects, as long as they give you credit and don’t hold you liable. Permissive licenses explicitly include a “no warranty” clause to protect the author (that means if someone uses your code, and it breaks something, they can’t sue you for damages). They also often include permission to redistribute and sublicense the code. The MIT License, for instance, is just a few lines long granting broad rights and saying “as-is, no warranty.” Apache License 2.0 is another permissive license but a bit longer – it not only grants broad rights, it also includes a patent clause. The patent clause is important if you have any patented technology in your code; it assures users they’re granted a license to any patents necessary to use the software. (In other words, if you hold a patent on something your code does, Apache 2.0 lets users use that technology without fear of a patent lawsuit from you.) Permissive licenses are developer-friendly and business-friendly because they impose few hoops to jump through. That’s why you see them on a lot of libraries and frameworks – they maximize adoption. However, if your goal is to ensure shared improvements (everyone who benefits from your code contributes back), then you might consider the next category.
Copyleft (Restrictive) Licenses: These are licenses like the GNU General Public License (GPL), Lesser GPL (LGPL), or the Affero GPL (AGPL). They’re dubbed “copyleft” because they require anyone who distributes your code (or derivative works of it) to also release their modifications under the same license. In simple terms, if someone builds upon your GPL-licensed code and distributes their version, they have to open source their version as well under GPL. This is why such licenses are called restrictive or viral – they “infect” derivative software with the same open source requirement. Now, why would you choose a restrictive license? One big reason is if you want to monetize or exert some control in the future. If your project is under a strong copyleft like AGPL, companies can’t just take your code, improve it internally, and sell it without sharing their changes. They’d either have to open source their whole product as well (which many won’t do) or come back to you for an alternative license. We’ll talk more about monetization later, but essentially, using a copyleft license can give you leverage to offer a dual license model (open source GPL for the community, but paid proprietary licenses for companies that want to use your code without the open-source obligations). GPL and AGPL also ensure that your project remains free and open for the community; no one can take it private and cut the community off. The downside is some businesses shy away from using GPL code in their products because of those obligations. LGPL is a bit of a middle ground – it allows linking to your code in proprietary programs under certain conditions, which is friendlier for libraries. The Affero GPL (AGPL) goes even further than GPL by closing the “cloud loophole” – it ensures that if someone only provides your software through a network service (SaaS, for example) they still have to provide the source to users on request (which plain GPL might not require for network use). So AGPL is one of the most restrictive licenses and often chosen by authors who want to ensure they can commercialize their project later or force contributions from anyone who benefits over a network.

Selecting the right license is a balance between encouraging adoption (permissive licenses make it easy for others to use your code) and protecting your vision or business model (copyleft licenses ensure improvements come back or give you a monetization hook). Regardless of which you pick, always include a LICENSE file in your repository and a brief header in your source files referencing it. And remember to include a “no warranty” disclaimer in your license (most standard licenses have this) so you’re not on the hook for any trouble caused by your code.

"Never Call It a Product"

This is a piece of advice often heard in open source communities: treat your open source creation as a project, not a product. Why? The wording might sound trivial, but it influences how others perceive your work and whether they’ll join in. If you announce your open source software as a polished product, people will tend to think it’s complete – a finished thing meant to be consumed. They might download it, sure, but they won’t feel invited to contribute. In the open source world, that’s the opposite of what you want! You want users to become contributors, testers, evangelists.

By contrast, calling it a project (or just referring to it by name without the product label) sends a signal that this is an ongoing, collaborative effort. It implies there’s room for improvement and that community involvement is welcome. For example, the Apache Software Foundation always refers to Apache software projects, not products. Linux is often called the “Linux project” or just “the Linux kernel,” not a product sold by Linux Inc. This framing encourages a mindset that anyone can pitch in. As one open source guide put it: the moment you call it a product, people will think it’s finished and there’s nothing to contribute; call it a project and they’ll be more inclined to become contributors.

Along with this naming mindset comes a broader philosophy: build a community, not just a user base. Successful open source projects are community-driven. That means you, as the creator or maintainer, shouldn’t act like a proprietary software boss dictating everything. Be open to outside ideas, give credit to contributors, and don’t hold the project too tightly to your chest. If you maintain complete control and make it a one-man show, contributors will feel sidelined and the project won’t gain a life of its own. By contrast, if you foster a culture of collaboration – say by using a public issue tracker, discussing features openly, and letting trusted volunteers become co-maintainers – your project can grow far beyond what one person or one company could achieve alone.

In short, never calling it a product is about keeping the door open. It reminds both you and the community that open source is an evolving journey. There’s always a next version to work on, always bugs to fix or features to add, and everyone is invited to help make it better.

Earning Money from Open Source

Open source is often associated with free software, and indeed, the software is usually free to use. This leads to a common question: “Can you actually make money from open source?” The answer is yes – there are several ways open source developers and companies earn a living from their projects, even though the code itself is given away for free. It’s not magic; it’s about providing additional value or services. Here we’ll explore a few of the most common open source monetization strategies:

Donations and Sponsorships: This is the simplest approach – you put up a “Donate” button or use platforms like GitHub Sponsors, Patreon, or Open Collective to let people financially support your work. Many independent developers fund their open source this way, and some projects (especially those with large, passionate user bases) can sustain themselves on donations. Wikipedia is a classic example of a platform sustained by donations from its users and community. That said, donation-driven funding is very hit-or-miss. For an average open source project, donations tend to trickle in rather than flood. It often depends on reaching a critical mass of users. If only a handful of people use your software, you might only get coffee money (one developer noted he got only about $30 in donations over several years for his niche project). But if your project is crucial to many (like a popular framework or app), users or companies might chip in more generously to ensure its development continues. In recent years, corporate sponsorships have also become a thing – companies sometimes pay or donate to open source projects they rely on, recognizing it as an investment to keep that project healthy. Overall, donations work best when your project has a strong community ethos and grateful users – it won’t make you rich overnight, but it can help cover costs.
Web Apps and OpenSaaS (Hosted Services): Another way to monetize open source is through a hosted web service or application. The idea here is that while the software is free, running it as a service (especially at scale) can be complex or resource-intensive – so you offer to do it for users at a price. For example, you might have an open source web application that anyone can download and install, but you also run a hosted version on your servers for convenience, charging a subscription or showing ads to fund it. This model is sometimes called OpenSaaS (Software as a Service built on open source). A real-world example is WordPress: the software (WordPress.org) is open source and free, but WordPress.com offers a hosted blogging service with advanced features for a fee. Similarly, many open source projects have a free self-hosted version and a paid cloud-hosted option (think of open source databases or monitoring tools offering a hosted cloud service). Even the mention of “web apps” can extend to simply leveraging website traffic – if your open source project’s website gets a lot of visits (say users coming to download binaries or read docs), you might monetize that traffic with ads or affiliate links. However, the big opportunity is usually in providing a convenient service or extra features on top of the open source. Users who don’t want the hassle of running it themselves will pay for a hosted solution. This way, the core remains free and open for those who want to DIY, and you earn revenue from those who prefer a ready-made service.
Support and Maintenance Services: This is a tried-and-true model that companies like Red Hat have proven to be very lucrative. The concept is straightforward: you give away the software for free, but sell your expertise in using that software. Big enterprises might love the cost and flexibility of open source software, but they often require hand-holding – like professional support, integration help, custom development, or guaranteed maintenance updates. As the original developer or an expert in a particular open source project, you can offer contracts or subscriptions for support services. For instance, Red Hat provides a stable, enterprise-hardened distribution of Linux along with support, and companies pay for that even though the raw Linux is free. In our context, if you have a popular open source tool, you could charge for things like priority bug fixes, technical support lines, consulting, deployment assistance, or training. Essentially, the open source project serves as a showcase and free base, and the paid offering is the professional service and assurance around it. This model works well when your user base includes businesses who depend on your software and are willing to pay for reliability and help. It’s worth noting that providing good support is a commitment – you’ll need to be prepared to act almost like a service provider or consultant to your users (which can be a full-time job!). But it’s a very direct way to monetize your skills and knowledge of the open source project.
Dual Licensing (Open Core Model): Dual licensing means you offer your software under two different licenses – typically one open source license and one commercial license. Often this goes hand-in-hand with what’s called an open-core model, where the core of the software is open source, but there are additional proprietary modules or features that are only available to paying customers. Here’s how dual licensing works in practice: you release your project under a copyleft license (like GPL or AGPL) to the public. This way, anyone can use it freely under those open terms, and if they improve it and distribute it, they must contribute back under the same license. At the same time, you offer a separate proprietary/commercial license for customers (usually companies) who want to use your software without the copyleft requirements. Those customers pay you for a commercial license that typically lets them embed your code into their closed-source product or use it without having to release their own changes. This model leverages the fact that many companies will gladly pay to avoid legal complications or to get extra benefits. Over time, as your open source project gains popularity (everyone loves free stuff and a good community-driven tool), you may reach a point where bigger players want to incorporate it into their products or workflows but don’t want to open source their entire code. That’s the perfect time to say, “sure, you can purchase a commercial license from me for that”. The key to making this work is that your open source license needs to be something like GPL (a strong copyleft) – if you used a very permissive license, companies wouldn’t need to pay you at all since they could use it freely without obligations. By using a restrictive license, you essentially set up a situation where serious commercial users are nudged to become customers for peace of mind or for proprietary extensions. Many open source startups have used this strategy successfully. For example, database companies like MySQL (before it was bought by Oracle) did something like this – MySQL was GPL, which meant if you embedded it in a proprietary product you’d have to GPL your whole product, so instead many companies paid for a commercial license from MySQL AB to get around that. Another example is GitLab, which offers a fully open source community edition and a proprietary enterprise edition – the latter contains extra features for paying customers. This model can be very profitable if your software becomes widely used, but it requires walking a fine line: you must maintain a healthy open source community (so the core stays strong and people are contributing) while also developing value-add features that justify a paid version. And you have to be transparent about it to avoid backlash (nobody likes feeling bait-and-switched from “free” to “paid”). When done right, dual licensing lets you have the best of both worlds – a thriving open source project and a revenue-generating business built around it.

Can there be other ways? Absolutely – the above are four common strategies, but folks have gotten creative. Some projects sell merchandise or swag to fans. Others secure grants or funding from institutions that want to support open source development. Some developers use open source as a portfolio to land a well-paying job or contract (indirect monetization, if you will). And some projects are now exploring cryptocurrency or NFT models for funding (though that’s still experimental). But for most developers, the main income streams from open source boil down to donations, services (support/consulting), hosting/hosting-related revenue, or dual licensing of some form.

One important thing to remember: making money from open source often requires building trust and user base first. It’s pretty rare to start an open source project and have cash rolling in immediately. Usually, you put in a lot of work to make something useful, nurture a community around it, and then monetization opportunities emerge when your project has proven value. Open source is not a get-rich-quick scheme – it’s more like build something great and free, grow adoption, and then find a model to sustainably support it (and you as the developer). Also, transparency helps. If you’re upfront with your community about how you plan to make money (e.g., “I’ll offer premium support contracts” or “there will be an enterprise add-on”), you’re less likely to face backlash. Open source users are generally supportive as long as the core remains open and the relationship feels fair. After all, everyone understands that developers need to eat!

Conclusion

Open source software has transformed the way we build and share technology. It’s rooted in a spirit of openness, collaboration, and mutual benefit. We explored what open source means – essentially, freeing the code for anyone to use and improve. We looked at how open source projects thrive through community involvement and transparent development practices. We discussed why open source is worth caring about, from personal learning and growth to massive industry adoption and innovation. We also dove into some practical realities, like how licensing can shape the future of your project and how, contrary to the old myth, you can earn money while being open source (through donations, services, dual licensing, and more).

For developers, admins, and students, getting involved in open source is one of the best ways to grow your skills and make an impact. You might start by using an open source tool, then reporting a bug, then contributing a fix or feature. Before you know it, you’re part of a global team building something amazing together. And if you’re launching your own open source project, hopefully the tips about community (remember: project, not product!) and monetization give you some ideas on how to keep it sustainable.

In the end, open source is a lot more than a licensing model – it’s a culture of sharing knowledge and building on each other’s work. Whether you’re in it for the learning experience, the community, or even to create a business, the open source world has room for you. So dive in, contribute, experiment, and who knows – the next big thing in tech might just come from your open source project. Happy coding!

Written by
Aash Gates
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