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Open-Source Software's - How do they make money?

The United Manufacturing Hub (UMH) is a company that is dedicated to putting the most powerful IT and OT tools into the hands of engineers. Our mission is to make these tools freely available to users through open-source technology, with the goal of enabling every factory in the world to run on open-source software.


But what exactly is open-source software? Simply put, it is software that is publicly accessible and allows users to inspect, modify, and enhance the source code. This is in contrast to proprietary or closed-source software, which can only be modified and inspected by the developers who created it and often requires a license or fee to use.


Given that open-source software is freely available to users, it's natural to wonder how businesses like UMH can generate revenue. In this article, we'll explore the various business models that open-source companies can use to monetize their products, including offering support and services, selling complementary products or hardware, and receiving donations and contributions from users.



Business Models


As an open-source company, the United Manufacturing Hub (UMH) relies on a variety of business models to generate revenue. These models allow us to monetize our products and services while still making them freely available to users. In this section, we'll explore some of the most common business models used by open-source companies and how they apply to UMH.


Open-Core

One business model that is widely used by open-source companies is the open-core model. Under this model, a limited version of the software is available for free, while a proprietary version with additional features is sold for a fee. At UMH, our primary monetization strategy is through our enterprise license, which is similar to a support contract or service level agreement. The enterprise license includes guaranteed updates with lifecycle management, a service level agreement, and access to technical support. It is a requirement for any UMH service, and is aimed at providing peace of mind to our technical managers. In addition to the enterprise license, we also offer the Management Console as a paid add-on for our open-source software stack. The Management Console includes features like automated root-cause problem solving, easy updating and monitoring, automated backup, patent-pending security, and automated documentation.


For example, UMH recently worked with a large bottling company that needed to retrofit and connect a number of machines in its factories. The company had limited in-house capabilities to maintain and integrate the UMH software, so it purchased an enterprise license to ensure that it had access to guaranteed response times and regular updates, including security updates. This helped the company to have peace of mind and ensure that its operations ran smoothly.


SaaS

Another business model used by open-source companies is the hosting or SaaS model. In this model, the company sells its software as a cloud-based service, hosting it on its own servers so that it is easily accessible to users. An example of a company that uses this model is WordPress, which is a content management system that is open-source. WordPress.com is the hosting server where the WordPress CMS is run, making it easy for users who don't have the technical knowledge or capabilities to create their own websites. At UMH, we also offer hosting and SaaS services to help companies deploy and manage our open-source software stack.


Paid Distribution

A third business model that is often used by open-source companies is paid distribution. Under this model, companies combine multiple vendor OSS projects and bundle them together for a fee. At UMH, we combine a wide range of existing open-source tools like Node-RED, Docker, Kubernetes, Grafana, and TimescaleDB, making our software stack similar to a paid distribution model in some ways.


Advertising Supported Software

Advertising-supported software is a business model in which companies generate revenue by placing advertising banners on their websites or in their software applications.


An example of a company that uses this model is AdBlock Plus, which is an open-source application that allows users to block unwanted ads. AdBlock Plus gains revenue from Google by allowing certain whitelisted ads to be viewed even with the ad blocker enabled. Another company that uses this model is SourceForge, which is a project service provider that generates revenue through banner ads on its website


Royalties

Royalties is a business model in which companies earn revenue by establishing deals that are built on top of their open-licensed software. For example, Mozilla made a deal with Google in 2018 to feature Google as the default search engine on Mozilla's browser. With this deal, Mozilla earned approximately 436 million dollars in royalties.


Multi-Licensing

Multi-licensing is a business model in which a version of the open code is available for free, while a special license is required for commercial use. Companies that monetize their software through multi-licensing include MySQL and Confluent.


Professional Services

Selling professional services is another common business model used by open-source companies. In this model, businesses offer a range of services to support companies using their software, such as support and consulting services. Open-source businesses can offer consulting services to help companies customize and optimize their source code to fit their specific needs or solve specific problems. They may also offer training and education services to help companies get the most out of their open-source software.


An example of a company that uses this business model is Red Hat. One way Red Hat generates revenue is through their support services, which are provided by a team of experienced engineers who are familiar with the company's software. Red Hat also offers a range of consulting services to help businesses tailor their software to their specific needs.


At UMH, we also offer professional services to help companies customize and optimize our open-source software for their specific needs. We believe that this business model is important for creating long-term partnerships with our clients, as it allows us to provide ongoing support and assistance to ensure that they are getting the most value from our software.


Summary

As an open-source company, UMH uses a range of business models to generate revenue from its products. One of the primary ways in which we monetize our software is through the sale of our enterprise license, which includes support and service level agreements. The enterprise license is required for any UMH service and includes guaranteed updates with lifecycle management and a commitment to security.


In addition to the enterprise license, we also offer a management console with features such as automated root-cause problem solving, easy updating and monitoring, automated backup, patent-pending security, and automated documentation.

We also offer professional services to help companies customize and optimize our open-source software for their specific needs. Finally, we use elements of the paid distribution business model by combining a wide range of existing open-source tools in our software stack.


Overall, UMH is committed to providing high-quality open-source software and supporting our clients through a range of professional services. We believe that this business model allows us to create long-term partnerships with our clients and ensure that they are able to get the most value from our software.


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