how-does-gitlab-make-money

How Does GitLab Make Money? The GitLab Open Core Business Model In A Nutshell

GitLab was created in 2013 by Ukrainian developers Dmitriy Zaporozhets, Valery Sizov, and Sytse Sijbrandij as a source code management solution for collaborative software teams. GitLab is a web-based, open-source DevOps tool providing issue-tracking and continuous integration and deployment pipeline features. It makes money via its main two paid plans (Premium & Ultimate) and via its subscription add-ons.

Origin Story

GitLab is a web-based, open-source DevOps tool providing issue-tracking and continuous integration and deployment pipeline features.

GitLab was created by Ukrainian developers Dmitriy Zaporozhets, Valery Sizov, and Sytse Sijbrandij as a source code management solution for collaborative software teams. Later iterations saw GitLab evolve to a more integrated solution, covering the entire DevOps lifecycle. Teams can now automate every aspect of this cycle, from planning to creation, build verification, security testing, deployment, and monitoring.

Today, the software incorporates an open-core development model. The core functionality is released under an open-source MIT license, but any additional functionality is subject to a proprietary license.

Gitlab has expanded aggressively since its founding in 2014, employing over 1300 team members across 67 countries. Last year, company revenue topped $150 million.

On October 14, 2021, GitLab IPOed reaching a valuation of almost $15 billion, at its opening!

gitlab-valuation
As it got listed, GitLab almost reached $15 billion in market cap. And it then passed the $15 billion mark by October 19, 2021 (Source: Google Finance).

GitLab mission, vision and value proposition

As the company explains in its financial prospectus:

We believe in an innovative world powered by software. To realize this vision, we pioneered The DevOps Platform, a fundamentally new approach to DevOps consisting of a single codebase and interface with a unified data model. The DevOps Platform allows everyone to contribute to build better software rapidly, efficiently, and securely.:

Therefore GitLab offers a one-stop DevOps platform to handle all software related activities and as the company further explains:

GitLab is The DevOps Platform, a single application that brings together development, operations, IT, security, and business teams to deliver desired business outcomes. Having all teams on a single application with a single interface represents a step change in how organizations plan, build, secure, and deliver software.

Its core, therefore, is to offer a single solution that combines development activities, operations, and security, in what’s defined technically as DevSecOps.

devsecops
DevSecOps is a set of disciplines combining development, security, and operations. It is a philosophy that helps software development businesses deliver innovative products quickly without sacrificing security. This allows potential security issues to be identified during the development process – and not after the product has been released in line with the emergence of continuous software development practices.

Why does it matter in the first place? DevOps platforms like GitLab are critical to development teams for the following reasons:

  • They help handle the full software cycle while reducing its development cycle times (GitLab claims from weeks to minutes).
  • It removes manual work.
  • And it also embeds security earlier into the development process.

In short, GitLab prevents companies from using do-it-your-self DevOps, thus enabling them to use a single solution, to prevent tools fragmentation and enable continuous updates. Therefore, reducing the development cycle as a result of the above.

In this respect, while a DevOps platform like GitLab provides value to the whole organization, by enabling development teams to release features, and product updates much faster. On the other hand, its main stakeholders, are developers within the organization, and executives like CTOs (chief technology officers) and CIOs (chief information officers).

A fully remote team

Since its inception, GitLab has been a fully remote company, and as of July 2021, it counted 1350 people in over 65 countries. This in turn helps the organization experience the challenges that DevOps teams across the world might have, to enable the platform to grow in that direction.

To make it clear to all how the company operates, over the years it built its own “corporate handbook” that went from a few hundred pages manual to a few thousand pages manual as of 2021:

gitlab-corporate-handbook
The growth in the word count of GitLab’s corporate handbook.

The handbook itself is managed via the GitLab repository, stating in its opening lines:

GitLab recognizes that the Handbook is a critical part of empowering team members to do their jobs effectively. As such we have implemented a basic on-call process … to ensure that someone is available to assist team members in the event that something is broken in the handbook or if they are having trouble with making updates to it.

Open core business model

As Sid Sijbrandij highlighted back in 2016:

We ship GitLab CE which is open source and GitLab EE that is closed source. We try to be a good steward of the open source project. GitLab EE is proprietary, closed source code but we try to work in a way similar to GitLab CE: the issue tracker is publicly viewable and the EE license allows modifications.

Therefore, in short, the hosted service is open-sourced, while the software is closed:

The hosted service GitHub.com is free for open source projects and it has fundamentally improved open source collaboration. But the software GitHub’s service is based on is closed source.

And he finally remarked:

In conclusion (TLDR), GitLab has an open core business model and ships both open and closed source software. GitHub hosts most open source projects but ships closed source software.

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

*As a sidenote to better understand this paragraph. Usually, in the digital/tech/software industry, there are open source and closed source players. The closed source is pretty much the old model, where you have proprietary software, owned by a company, which develops and monetizes on top of it. We don’t know what makes up that source code, as it’s fully controlled by the corporation (e.g. Google Search Algorithm, Facebook Social Graph, etc.). Then, you have the open-source organization, which usually builds the codebase (what makes up the core software) as a community effort, or also as the effort of a group of developers and then it releases to the world with an open-source license. The group of people that created the open-source code, usually give its ownership to a non-profit organization, while they also enable a corporation to be built on top of it, to monetize the open-source software, by adding premium/enterprise features (eg. WordPress/Automattic).

Therefore, the open-core business model claims to be an evolution of open source, where it combines funding features typical of startup land (usually open-core companies are venture capital-backed), and it leverages on open source, by offering a limited version of the platform or software, then offering premium features and add-ons as monetization strategies.

This piece from GitLab explains well the duality of its business model and how the company tackles it:

GitLab Inc. is a for profit company that balances the need to improve the open source code of GitLab with the need to add source-available features in order to generate income. We have an open core business model and generate almost all our revenue with subscriptions to paid tiers. We recognize that we need to balance the need to generate income and with the needs of the open source project.

How does GitLab balance the open-source model with a proprietary one?

A set of promises are underlined by the company, summarized below

When a feature is open source we won’t move that feature to a paid tier.

We won’t introduce features into the open source codebase with a fixed delay, if a feature is planned to land in both it will be released simultaneously in both.

We will always release and open source all tests that we have for a open source feature.

The open source codebase will have all the features that are essential to running a large ‘forge’ with public and private repositories.

The open source codebase will not contain any artificial limits (repositories, users, size, performance, etc.).

All stages of the DevOps lifecycle (plan, create, verify, package, release, configure, monitor) will have some open source features.

The majority of new features made by GitLab Inc. will be open source.

The product will be available for download from a link above the fold on the desktop homepage without you having to submit an email address or sign in.

We will always allow you to benchmark the performance of GitLab.

We will make our Free tier easily discoverable.

Therefore, this is a sort of practical “Do Not Be Evil Manifesto” from GitLab. Intended as the foundational code of ethics to cooperate in an open source environment.

GitLab in numbers

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GitLab explosive user growth as shown in its prospectus.

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GitLab revenue generation

git-lab-revenues
As of 2021, GitLab had two primary revenue streams: Subscription and License. The subscription-based revenues run rate was over $132 million in 2021, while the license run rate was over $19 million in the same year.

Gitlab follows the freemium model that is supported by a paid subscription service.

The free option is touted as providing a complete DevOps platform, but it does require that users provide their own CI runners and production environment.

For those desiring more functionality, there are two paid options:

mda2aa.jpg
GitLab leverages a freemium model, where a first free tier is offered with limited capabilities. While users can upgrade to premium tiers to have premium features, primarily based on faster code reviews, project management tools, better customer support. And the highest tier focuses more on security and portfolio management (Image Source: GitLab prospectus).
  • Premium ($19/user/month, billed at $228 annually) – the premium plan provides DevOps with added features including code integrity controls, productivity data, and project management. Disaster recovery and 24/7 support are also offered.
  • Ultimate ($99/user/month, billed at $1188 annually) – the Ultimate plan offers full DevSecOps with advanced security testing, compliance, and portfolio management. Teams can also utilize vulnerability management, free guest users, dependency scanning, and 50,000 CI/CD minutes per month.

Add-on subscriptions

For users who exceed their CI/CD minutes usage, additional CI minutes can be purchased for $10 per 1,000 minutes. Aside from this one-time payment, Gitlab also allows users to simply upgrade their plan to receive a greater allowance.

For those desiring more storage space, Gitlab offers 10GB for an additional $60. It should be noted that this charge is an annual, recurring subscription regardless of the data used.

Special projects

GitLab also offers special pricing in the form of a free Ultimate license to eligible:

  • Start-ups.
  • Educational institutions, and
  • Open-source projects.

Additional users

GitLab allows its customers to add more users mid-subscription by contacting the company for a customized quote.

The cost of adding extra users is pro-rated from the date of the quote or purchase through to the end of the subscription period.

Alternatively, customers can use the GitLab True-Up model to add additional users. In this case, a company that has grown from 100 to 300 users can renew on a 300-user plan while also paying a full annual fee for the 200 extra users it added.

Who Owns GitLab

gitlab-top-shareholders

Key takeaways:

  • GitLab is a web-based, open-source tool that allows full automation of the entire DevOps lifecycle. It was created by Ukrainian developers Dmitriy Zaporozhets, Valery Sizov, and Sytse Sijbrandij.
  • GitLab works on a freemium model backed by two paid subscription plans with greater functionality: Premium and Ultimate.
  • Gitlab also makes money through add-on subscriptions, enabling users to purchase additional CI minutes and storage space. Additional users can also be accommodated on a prorated basis or by using the proprietary True-Up system.

Read Next: How Does GitHub Make Money?

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"