You have landed on the right page if you wonder how open-source software companies like Elasticsearch earn revenues despite providing services free of cost.
This article will discuss open-source software like Elasticsearch in great detail and answer pertinent questions like – ‘what is the business model followed by open-source companies like Elasticsearch?’, ‘How do open source projects make money?’ and ‘How does Elasticsearch make money for its employees?’
- What are Open-Source Software Companies?
- What is Elasticsearch?
- When and How Do Open Source Projects Get Profitable?
- Other Revenue Models for Open Source Companies
- Additional Ways of Profit Generation
What are Open-Source Software Companies?
Open-source software is computer software that a particular proprietor owns. They are available to all coders across the globe for free for the benefit of the entire development community.
Open-source software is made available to everyone free of cost so developers can constantly modify it, upgrade it, and learn from it. You can alter the applications to suit your own unique needs and contribute to the source code to make it better.
Some of the benefits of open-source software are:
- Open-source software is ever-improving because large communities of developers work on the source code to improve the software’s efficiency.
- The distribution is rapid since these softwares are free of cost.
- This software is very secure as users scrutinize the code.
- The software becomes reliable and resilient as rigorous testing across numerous architectures and environments is conducted.
It is important to know what open-source projects and softwares are before one can comprehend how open source companies make money.
What is Elasticsearch?
Before we jump into the business model of Elasticsearch and answer questions like ‘How does Elasticsearch make money?’ it is crucial to know what Elasticsearch is.
Elasticsearch is primarily a free; open-source software first released in the year 2010 by N.V. Elasticsearch is an analytical search engine built on Apache Lucene and written in Java. It operates by creating JSON objects to store data instead of using documents.
In simple terms, it is a distributed and open-source engine that assists users in searching for any kind of data in text and number format. The data is not organized in rows or columns, and therefore it is similar to a No-SQL database.
Elasticsearch functions at high speed and has high scalability. It is well known for its restful APIs and distributed nature, and it also allows users to search and analyze their data in real-time. Elasticsearch is a part of the Elastic Stack, which comprises Logstash, Kibana and Beats.
Elasticsearch is used for several purposes. Some of them are:
- It is used by developers as it considerably reduces the debugging time.
- It helps in creating a robust and powerful search experience for your website.
- Elasticsearch has the ability to notify the most used communication channel in case any malicious activity or malware is detected in the infrastructure.
- It is used in security, metrics and business analysis.
- Elasticsearch can be used for searching most of the popular sites.
Besides these functions, Elasticsearch is also used for several other processes and learning to use Elasticsearch can be highly beneficial for you as a developer or business owner.
When And How Do Open Source Projects Make Money?
The points given below also shed light on topics like ‘How does Elasticsearch make money?” There are several ways in which an open source can become profitable and earn huge revenue.
Some of the crucial prerequisites for an open-source project or software to become profitable are as follows:
- Having a large community: Open-source software has a way of becoming popular quickly because users can access it without paying a dime. When open-source software becomes popular, a large community of developers who work on that particular software is created automatically.
This increases the demand for the software and people start relying on its services. Once people and corporate infrastructures begin relying on the software, premium features are needed.
This is how open source companies make money by starting to charge money for their premium features and corporate support features. A huge part of the revenue for open-source software companies is generated from lending corporate support that adds great value to the companies.
In short, a large development community acts like a sales team (like in paid software companies) without actually having to do anything.
- Providing multiple solutions through customizations: Open-source software can provide multiple solutions to users. A user might have a variety of tasks that need to get done, and open-source companies will customize solutions for you for a particular amount.
This offer often appears in the disguise of paid subscriptions. When users opt for paid subscriptions, they have to pay a monthly, yearly or quarterly amount depending on their plan to avail themselves of the extra features which they might require to get a specific job done.
These premium features of open source software facilitate tasks like seamless development, error detection, quick debugging, fast compilation, etc. The open-source software profit considerably from the sale of these premium features.
- Having integrated offerings: Open-source softwares can always be integrated with other open-source softwares and be labeled as an open-source ecosystem that gives a unique solution to a particular task at some nominal cost.
For example, open-source database software can be integrated with softwares that provide front-end web development features to provide full-stack development features.
These integrated features can be made available to people at a cost and therefore, even if the open-source softwares are free individually, the integrated ecosystem (which basically will serve as a one-stop solution for your needs).
This can be made chargeable by adding some extra features that would not be available if you install the softwares individually. This is one of the ways how open source companies make money.
Investments: How does Elasticsearch make money through investments is quite clear. Elasticsearch has raised a total of about $35 million from the investment community for their open-source software, which comprises the Elastic Stack (Made up of Elasticsearch, Beats, Logstash and Kibana).
After receiving the funding from the investors, Elasticsearch has employed some of the top developers in their firm.
Elasticsearch primarily generates a huge chunk of profit by selling professional support in the form of contracts to various famous and large enterprises like Netflix and Facebook.
This basically entails these enterprises paying a considerable amount of money to Elasticsearch so that Elasticsearch provides them with exclusive services that will help them make sense of their data.
Elasticsearch not only queries and organizes data for these huge corporations but also analyses it to provide them with valuable information. This business model is not essentially very unique, but it’s definitely a great and proven model for generating revenue.
Other open-source companies that follow the same procedure are Red Hat Linux, MongoDB and the Hadoop ecosystem.
Related: Best Elasticsearch Books
How Does Elasticsearch Make Money Through Various Other Avenues?
1. Dual Licensing: In a dual-licensed model, the vendor develops software and offers it under an open-source license under different licensing conditions.
The patented version may be licensed to support the further development of free open source version. Customers can choose an inexpensive open-source system to evaluate, analyze and ensure business development.
If a customer wishes to use the software on a standard basis or in proprietary products, the customer then negotiates to obtain a commercial publishing license for the business.
This is mostly how open source companies make money and Elasticsearch is no exception.
2. Crowd-funding: Crowd-funding is the process by which open-source companies raise funds for themselves by announcing rewards to the people in exchange for monetary donations. Crowd-funding is extremely common among open-source companies like Elasticsearch and helps them earn profits.
3. Able competitors: Open-source companies often compete with large corporations to gain traction. They release an open-source product for the paid ones already available in the market and make the users of those paid products flock to their side because they provide the same service free of cost.
Later, when users become completely dependent on the applications, these companies start offering paid subscriptions apart from the free version, making a hefty profit.
4. Sale of merchandise: Monetizing on merchandise is another stream of income for open source companies. They sell branded merchandise items mugs, T-shirts and caps.
5. Angel investors and donations: While answering the question – ‘How do open source projects make money?’ one cannot afford not to mention angel investors and voluntary donations.
Open-source softwares accept a lot of investors which increases their market value and thereby helps them make a profit. That how does Elasticsearch makes money too.
Free software companies also have provisions to facilitate donations to be made for the company, and several well-off tech enthusiasts make such donations to help the community prosper.
For example, Elasticsearch raised $35 billion dollars despite being an open source from investors even before the company was formed. It continues to receive funding from the tech community even today.
6. Paid technical support in case of malfunction: Softwares being purely technical in nature are prone to malfunction at times. In such situations, users need support.
So, the income is generated whenever there is a technical fault, and the user has to pay the technicians to provide solutions to it.
Other Ancillary Ways In Which Elasticsearch Generates Profits
- They also sell professional training. Anyone can opt for an Elasticsearch course after paying a nominal amount.
- They provide exclusive services to even individuals and small companies to add value to their projects after charging them for the extra services.
- Elasticsearch is part of the Elastic Stack. The Elastic stack charges for plugins like Kibana.
- Elasticsearch also makes money by providing consultancy services.
- Elastic also has various paid subscription plans like standard, gold, platinum etc., for individuals who want to access the premium features of the Elastic stack. Again, there are several plans to choose from and satisfy your exact requirements.
This article aims to provide you with a clear-cut idea of ‘what open source softwares are,’ ‘how do open source projects make money’ and ‘how does Elasticsearch make money for its developers and employees?’
The Elasticsearch user base comprises multi-national corporations like Netflix, Facebook and Goldman Sachs. Investors invest billions of dollars in this developing company in improving their infrastructures to provide the necessary services and support globally at affordable prices.
These investments, large communities and the demand for premium features earn large amounts of revenues for open source softwares like Elasticsearch.
Elasticsearch is still a growing company and it will be beneficial for developers to learn how to work in Elasticsearch as it is greatly in demand in today’s world.
Good open-source softwares are the one that can detect, understand and provide solutions to user needs from day one, and that is exactly what Elasticsearch has done. It is the sole reason why it has gained rapid popularity and is considered to be an indispensable technology by corporate giants.