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How Does Linux Make Money + Everything Else You Need To Know

Jenna Gleespen - April 02, 2021

How Does Linux Make Money

Originally based on the old Unix systems Linux is a free open-source software operating system.

Open source means that the source code of the software is freely available to anyone.

It can also be changed or used with no rights reserved. So, how does Linux make money? Read on to find out.

Under the terms of its specific licenses, open-source software may be sold commercially.

Anyone can contribute to Linux and it has support from a community of developers and software engineers.

That’s why Linux is constantly evolving with the goal to become better. It has grown from relatively obscure beginnings and niche use.

It is now one of the most popular operating systems currently in use for developers.

How does Linux make money?

Linux History

Linux was first released in 1991. It was meant as a more basic and simplistic version of the Unix operating system.

The original developer, Linus Torvalds, decided that Linux software would remain free and open-source, unlike many other operating systems.

He was motivated to develop an operating system. He felt that there was a lack of affordable and accessible systems available.

Linus Torvalds created his software to be used on computers running the Intel x86 architecture.

Originally, Linux was used only by a small group of hobbyists and developers.

However, by the 1990s it became more popular as it saw more use in large supercomputing production environments.

Linus Torvald

Many organizations like NASA began replacing their expensive systems with cheaper computers using a Linux Foundation.

Other companies, like Dell, IBM, and HP, also changed their systems to Linux as they sought to distance themselves from Microsoft with its closed source operating system and office suites.

Linux has continued to evolve.

It is now used on more platforms and systems than any other operating system in the world, and in virtually every supercomputer that exists.

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Who Owns Linux

Because Linux is free and open-source software, it doesn’t really belong to any single person.

The Linux source code is freely available which means that development companies can use the code to create new distribution packages and versions of Linux.

They can then license these as their own products to sell and make money.

Examples of these distribution versions include Debian, Fedora, Ubuntu, and Red Hat.

Distribution versions of Linux also run a variety of everyday items.

For example, smartphones use the Linux-based Android system, as do many other smart products.

Linux also powers about 90% of all cloud infrastructure and related software as a service (SaaS) models, and it’s even used in the avionics of spaceships.

How Does Open Source Software Like Linux Make Money?

How does Linux make money?

There are a lot of ways that open source software companies can make money using Linux.

The demand for newer and better software means that software companies will always have an ongoing market opportunity and a reliable customer base.

This demand also means that new add-ons and extensions can be created to enhance standard Linux systems and cater to very specific requirements.

Naturally, these add-ons can be sold as “freemium” software products.

An easy way for a company to make money is to research the market and identify technology gaps that users may be looking for.

Looking at users’ questions can provide a roadmap to developing a lot of new versions and services that can be marketed and sold.

A good example of this type of monetization is WordPress, which has an open-source codebase.

Its community edition version of the software allows anyone to contribute to the code, make bug fixes if necessary, and answer questions from users.

But WordPress is very limited, and to add more functionality to the platform, you need to add plugins which can be completely free or paid.

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Another version of the “freemium” model of a commercial application is creating a Linux product that has a free software core version and then offering a paid professional upgraded version with lots of extra features and applications.

A good example of this model is the standard version of Red Hat versus the premium distribution version of Red Hat Enterprise.

Another example is again WordPress with its external plugins.

Even though most of these plugins are advertised as free, users’ functionality will be limited.

However, for an additional fee users can purchase the premium or pro model that will unlock all functions and also usually offer support as well.

How Else Can You Make Money with Linux?

One more way to make money with Linux is by offering paid professional support services for free open-source software.

So for instance, a company uses Linux to develop a new piece of software that fulfills a huge market need.

They open the software is up for free distribution, download, and use.

However, its design as a structure is extremely difficult to use for most customers.

So, the company offers premium paid support packages or expensive training courses that will help the users of the software.

Developers and open-source companies can also make money by providing their open-source software to the public.

They can then ask for donations or “a cup of coffee” to help them continue their ongoing developments.

This has become a popular way for free software developers to earn an income from their open-source projects.

It appeals to the goodwill of the people who use the software and encourages them to do their bit for humanity by supporting open source products.

Any open source project which supports a charity organization or cause can also apply for formal funding and grants.

This allows a business to fund most of its development costs for software and offer support services.

Companies make money from Linux in a variety of inventive ways.

They use proprietary software, commercial products, or a combination of services delivered as a customized business model.

How Much Money Does Linux and Red Hat Make?

Many of the Linux open-source distribution companies choose not to publish their earnings since they’re not public companies.

Other giants who use the Linux Foundation as their core software are on the stock exchange.

Their earnings are public knowledge. Companies like Google, IBM, and HP (Hewlett Packard) are very good examples of this.

They have made many billions of dollars in revenue from their paid products that use Linux.

Google alone reports having a revenue income of about $182.5 billion in 2020.

Some open-source companies, like Red Hat, have chosen to share their earnings and increase in customer base.

They reported a 40% increase in 2003 which included $90.9 million in sales and 4,500 new subscribers.

By 2018, their net income had increased to $434 million.

What Is Linux Worth

It is quite difficult to gauge exactly what the total current worth of Linux is.

This is due to the lack of reporting from many open-source companies.

With the rapid growth of the market along with the income from the hardware components, predictions were that Linux’s worth would exceed $35.7 billion back in 2008.

However, a Fortune Business Insights report article has decreased this prediction and declared the worth closer to $3.89 billion in 2019.

During that year the open-source company Red Hat was acquired by IBM in 2019 for an amount of $34 billion.

At the same time, Google became the third American tech company to reach a worth of $1 trillion in 2020.

With the ongoing open-source market growth, the progression of the smart-device market, and other evolving developments, estimates are that Linux should reach a worth of around $15.64 billion towards the end of 2027.

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How Can Linux Make Money In The Future

There are many different ways that Linux-friendly companies will be able to profit in the future.

Open source development in Linux is not only ongoing, it is in fact speeding up.

Google and its Chrome search engine, Android mobile systems, and cloud-based storage and architecture are not only becoming more popular, but they are setting the benchmark and becoming the norm.

The global online community is increasing by the second as more and more companies realize how much smaller technology makes the world.

Open-source software companies can collaborate with developers and open source projects from anywhere in the world.

Recruitment of talent can take place on an international scale and the pool of resources now available is almost infinite.

As many businesses move to a more integrated online presence, the demand for web resources is increasing exponentially.

That means that more web servers running on Linux open-source systems are now online to fulfill the demand.

Google has more than 20 data centers across the world. They contain an estimated 2.5 million servers, Most of them running on Linux open-source systems.

With all of these increases in demand and development of Linux-based technology, it is not difficult to foresee that the market is ripe for businesses to continue making more money from open source services, software as a service (SaaS) products, and specialized support.

Final Thoughts

Thirty years have passed since Linux was first created.

The software development industry has seen a many changes over the last few years, with both old and new software companies experiencing a bell curve rise and fall as demand and popularity diminish due to evolving tech models.

The ability to not keep up and grow with the times signaled a death knell for some and a new opportunity for others.

But the online industry has only continued to grow experiencing an upswing in all open source usage areas.

Google, Android, and Cloud continue to innovate, enhance, and improve the user experience.

Remote working and globalization mean that email, online conferencing, software as a service (SaaS) products, and other open-source developments have become essential elements in any company or business model.

As the user base continues to grow, so too will the demand for better ways of using Linux and the services it offers.

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Jenna Gleespen is a copywriter specializing in finance and investment finance. Originally from the United States, she now calls London, England home.