Open core is a business model in which a company releases the core of its software as open source and sells proprietary features, hosting or support around it. The term is associated with Andrew Lampitt, who used it in 2008, and the model spread through developer tools and databases such as GitLab and Elastic.
Decide which features stay open and which are paid. GitLab's rule is to ask who the likely buyer is: features for individual contributors stay open source.
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Grow through the community
The open core spreads through downloads, contributions and word of mouth, which lowers the cost of winning users.
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Sell to the organisation
Paid tiers target needs that appear at company scale: access control, compliance, support and managed hosting.
Some firms change licences when cloud providers sell their open code as a service, which can split the community.
Where you see it today
Open-weight AI models
AI labs now run a version of open core. Meta releases Llama weights under its own community licence, which lets most companies use them but requires a separate licence for the very largest services. Revenue and strategic value come from what sits around the free model.
The Open Source Initiative’s Open Source AI Definition 1.0 says an open AI system must share its parameters, its code and detailed information about its training data. Many open-weight models share only the weights, so the label is contested.
Licence swings at infrastructure firms
Elastic moved Elasticsearch away from an open-source licence after disputes with AWS, then added the OSI-approved AGPL as an option again in 2024. The episode shows the tension between protecting revenue and keeping the trust of contributors.
Hosted services as the paid layer
For many open-core companies the cloud version is now the main product. Customers pay for not having to run the software themselves, which matters more than any single locked feature.
Open core vs related models
Open core
What is freeThe core codebase, under an open-source licence
What is paidEnterprise features, hosting, support
Pure open source
What is freeAll the code
What is paidServices, support or donations
Freemium SaaS
What is freeA limited tier of a hosted product
What is paidHigher tiers; the code stays closed
Source-available
What is freeCode you can read, with use limits
What is paidProduction or competing commercial use
Open-weight AI
What is freeModel weights, often with licence conditions
What is paidAPIs, larger models, enterprise deals
How to use it
Write down a public rule for what stays open, such as GitLab's buyer-based test, and keep to it.
Put features that individual users need in the open core; charge for needs that only appear at company scale.
Plan early for cloud providers hosting your open code, rather than changing licences later under pressure.
Treat the hosted service as a product in its own right, with its own roadmap.
If you release AI model weights, state the licence terms plainly and say what is and is not shared.
The Business Engineer lens
Open core is how many AI companies compete: release a capable model to win developers, then charge for scale, reliability and integration. The Business Engineer view is that the open layer sets the floor on price, so durable value moves to distribution, data and the services around the model.
A company gives away the core of its software as open source and charges for proprietary features, hosting or support built around it.
What is the difference between open source and open core?
In pure open source all of the code is open; in open core only the core is open and some features stay proprietary.
Why do some open-core companies change their licences?
Usually to stop large cloud providers from selling the open code as a hosted service without contributing back, as Elastic said of its dispute with AWS.
Are open-weight AI models open core?
Many follow a similar logic, but most do not meet the Open Source Initiative's definition, which also asks for code and training-data information.
The complete explainer, cleaned up and reformatted for mobile.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Definition
ExplanationThe Open-Core Model is a software business strategy where a company offers a core product or platform as open-source software while complementing it with proprietary or premium features that are available under a commercial license. This approach allows businesses to balance the advantages of open-source collaboration and community development with revenue generation through the sale of proprietary add-ons or advanced features. The core open-source offering typically serves as a foundation for a wide user base and fosters community contributions, while the proprietary features cater to enterprise customers’ specific needs and generate revenue. The Open-Core Model is commonly used in the software industry and is characterized by its ability to monetize open-source software while maintaining a vibrant developer community.
Key Concepts
Explanation– Open Source: The foundation of the Open-Core Model is an open-source, community-driven core product that is freely accessible and modifiable by anyone. – Commercial Licensing: Proprietary or premium features are available under a commercial license, typically requiring payment for access. – Dual Licensing: Dual licensing involves offering the software under both open-source and commercial licenses, providing users with a choice. – Community Contributions: Open-source projects encourage community contributions, such as bug fixes and feature enhancements. – Monetization: The model seeks to monetize the value-added proprietary features while maintaining a free, open-source core.
Characteristics
Explanation– Hybrid Approach: The Open-Core Model combines open-source principles with commercial software practices. – Core Open Source: The core product is open source and free to use, making it accessible to a wide user base. – Proprietary Add-Ons: Proprietary or premium features are offered as add-ons or extensions to the open-source core. – Community Engagement: The model fosters community engagement, including contributions, bug reporting, and collaboration. – Revenue Generation: The primary revenue source comes from selling licenses for proprietary features to enterprise customers.
Implications
Explanation– Community Development: The open-source core benefits from community-driven development, which can lead to innovation and rapid improvement. – Revenue Stream: The model generates revenue through the sale of commercial licenses for proprietary features. – Enterprise Adoption: Proprietary features attract enterprise customers seeking advanced functionality and support. – Balancing Act: Companies must balance open-source principles with the need for revenue generation, which can be challenging. – Competitive Advantage: The Open-Core Model can provide a competitive advantage by offering a combination of free and premium features.
Advantages
Explanation– Community Growth: Open-source cores can attract a large and active user and developer community. – Monetization: Proprietary features offer a sustainable revenue stream for the company. – Flexibility: Users can choose between free open-source features and premium ones based on their needs. – Enterprise Adoption: The availability of advanced features can attract enterprise customers and support contracts. – Innovation: The open-source community fosters innovation and rapid development.
Drawbacks
Explanation– Community Tensions: Balancing the interests of the open-source community and enterprise customers can lead to tensions. – Complexity: Managing dual licensing and proprietary add-ons can be complex and require careful planning. – Dependency: Enterprise customers may become dependent on proprietary features, creating vendor lock-in. – Licensing Challenges: License compliance and enforcement can be challenging for the company. – Competition: The company may face competition from fully open-source alternatives or proprietary solutions.
Applications
Explanation– Database Management: Database management systems like MongoDB offer open-source versions with proprietary features for enterprise use. – Content Management: Content management systems like WordPress offer open-source cores with premium plugins and themes. – Cloud Services: Some cloud service providers offer open-source platforms with premium managed services and support. – Monitoring and Analytics: Monitoring and analytics tools may provide open-source agents with premium reporting and analysis features. – Development Tools: Development tools and frameworks often use the Open-Core Model to monetize advanced features.
Use Cases
Explanation– MySQL: MySQL offers an open-source database system while providing enterprise customers with advanced features and support through MySQL Enterprise. – Elasticsearch: Elasticsearch provides an open-source search and analytics engine with additional security and management features in its commercial offering. – Red Hat: Red Hat offers a similar model by providing open-source Linux distributions with enterprise support and management tools. – GitLab: GitLab’s open-source platform for DevOps is supplemented by premium features and services for businesses. – WordPress: WordPress offers a free, open-source content management system with premium plugins and themes available for purchase to enhance functionality.
Open Source vs. Open Core
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.The Open Core Strategy was explained by Andrew Lampitt (Image Source: Slideshare, credit: Andrew Lampitt).
The central value proposition of open source core vendors has been freedom from vendor lock-in. After all, the core elements of the product are open source, developed by a global community. The core product isn’t owned by a single company, but, in almost every meaningful instance, by the Apache Software Foundation (ASF). If the worst happens and we go out of business, the code will live on in the ASF. You’re safe. If you don’t like us, it’s open-source. You’re protected. I don’t know what happens next but hey open source.
In an open-core model, like Elastic, some portion of the product is free, but the premium version or add-ons are licensed with a commercial license. (Think community edition vs. enterprise edition.) “Here an open-source vendor’s biggest competitor is usually its free version,” said Kellogg.
Participation Is Constrained. Open Core companies may limit participation to keep premium features from being contributed. – We actively work to grow participation since our missions is that Everyone can Contribute. Also, we do not say no by-default to having existing paid features contributed to our open source project.
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.
Case Studies of Open-Core Model
GitLab:
GitLab, a popular DevOps platform, operates on an open-core model.
The core functionality, including source code management and basic issue tracking, is offered as open-source software.
GitLab monetizes its platform by offering premium features and services through paid plans (Premium & Ultimate) and subscription add-ons.
This approach allows GitLab to balance the benefits of open-source collaboration with revenue generation from enterprise customers.
Elastic:
Elastic, known for its search and analytics engine Elasticsearch, also follows an open-core model.
The core components of Elasticsearch are open-source and freely available.
Elastic offers additional premium features, such as security and management tools, through licensed versions or add-ons.
By leveraging the open-core model, Elastic attracts a wide user base with the open-source core while catering to enterprise customers’ advanced needs.
MySQL:
MySQL, a popular database management system, adopts the open-core strategy.
The core database functionality is available as open-source software, allowing for widespread adoption and community contributions.
MySQL offers enterprise customers advanced features, support, and management tools through its commercial offering, MySQL Enterprise.
This hybrid approach enables MySQL to serve both individual users and large enterprises effectively.
WordPress:
WordPress, the widely-used content management system, implements elements of the open-core model.
The core WordPress software is open-source and powers millions of websites worldwide.
WordPress ecosystem includes premium plugins and themes, developed by third-party developers or the WordPress team, offering additional functionality and customization options for users.
By combining open-source principles with premium add-ons, WordPress caters to diverse user needs while fostering a vibrant developer community.
Red Hat:
Red Hat, a leading provider of open-source solutions, employs an open-core approach in its businessmodel.
Red Hat offers open-source Linux distributions, such as Red Hat Enterprise Linux (RHEL), as the core product.
The company monetizes its offerings by providing enterprise-grade support, management tools, and services for RHEL through subscription-based models.
Red Hat’s open-core strategy enables it to deliver reliable, secure, and scalable solutions to enterprise customers while promoting collaboration within the open-source community.
Key Highlights
Open-Core Model Overview:
Coined by Andrew Lampitt, open-core is an evolution of open-source software.
A core part of the software/platform is offered for free, while premium features or add-ons are built on top and monetized.
Example: GitLab open-core model where the hosted service is free and open, while the software itself is closed.
Open Source vs. Open Core:
Open source is developed by a community of independent developers and usually has open distribution.
Open core’s core product is developed in-house and allows the company control over distribution.
In open source, premium versions need to be distributed according to open-source licensing.
Value Proposition of Open Core:
Open-core vendors provide freedom from vendor lock-in.
Core elements are open source, developed by a global community, often owned by organizations like the Apache Software Foundation (ASF).
Other Examples of Open-Core:
Elastic follows an open-core model, with a free portion of the product and licensed premium versions or add-ons.
The competition for open-core vendors is often their own free version.
Criticisms of Open Core:
Participation might be constrained as companies may limit contributions of premium features.
Some argue that open-core models limit the true spirit of open source and collaboration.
GitLab and its Revenue Generation:
GitLab, founded in 2013, is a web-based, open-source DevOps tool.
It provides source code management, issue-tracking, continuous integration, and deployment pipeline features.
GitLab makes money through paid plans (Premium & Ultimate) and subscription add-ons.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
