The funding of open source software by people and organizations implies that there must be some benefit to the funder beyond the production of the open source software itself. As the software is distributed free to some or all users this benefit is not a profit from the sale of the software.
The following table summarizes some of the funding sources for open source development and the possible motivation for the funding.
Who
How They Provide Resources
Possible Motivation
Independent Developers
Provide development time.
Use the final product.
Recognition for their effort and skills from their peer group. May be valuable for young developers to add weight to their résumé and for independent consultant to foster their reputation.
Receipt of donations either directly or through open source support organizations.
The sale of documentation
Many independent developers enjoy open source implementation to advance their technical capabilities and get feedback from real users.
Provide consulting and maintenance for the product.
Commercial companies
Provide development time.
Provide infrastructure (bandwidth, source management and web hosting services). For example: SourceForge that hosts tens of thousands of open source projects or IBM that hosts the Eclipse project.
Gain free improvements to software that is used internally by the company.
Use the software as a base for commercial products. For example: IBM sells a professional version of Eclipse, Sun sells a professional version of NetBeans.
Sell services related to the software (e.g. support, training, documentation, packaging). For example Red Hat sells and supports a version of Linux. The Jboss Group sells training, hosting and development services for JBoss.
Sell advertising space on the support sites (e.g. SourceForge).
Improve corporate image, in particular striking a contrast with companies like Microsoft.
Undermine the business model and market share of a competitor who provides a similar product but charges for it.
Venture Capital Companies
Provide funding.
Provide management advice.
Exit and sell their shares with a profit.
For example SugarCRM, Jboss Group and one of the leading open source database companies MySQL have received substantial amounts of venture capital.
Governments/Public Authorities
Provide funding.
Save money on commercial licenses by using open software.
See software as a strategic asset over which control should be maintained
See open source software as way to lessen the dependence of the country upon foreign companies
See open source software as a way of creating local skills and jobs.
Private users
Provide funds either directly to developers or through sites such as:
SourceForge that allows users to donate to specific projects or even specific developers.
Get tax reductions. Donations to open source charities (e.g. SPI) are tax-deductible in some countries.
Specialized markets[]
There have been some attempts at making the funding, and therefore the production, of open source development more efficient by organizing specialized markets. This idea has not yet met with success. Markets for Open Source Software is an index of some (failed) attempts. SourceForge's donation system introduced in 2007 can also be seen as an attempt of building such a market.
Private organizations[]
Private organizations providing funding for open source development include:
Omidyar Network
The Linuxfund
See also[]
Commercial open source applications
List of venture capital firms
References[]
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The Business and Economics of Linux and Open Source by Martin Fink (ISBN 0-13-047677-3)