Open Core and Open Source

Red Hat gave away Linux for free and built a billion-dollar business on it anyway, and IBM eventually paid about $34 billion for the company. The open source was never the product; the enterprise relationship was. Red Hat's insight in the 1990s was that big companies did not want to run free community software without someone to call at 2 a.m. when production went down, so it packaged, certified, and supported Linux and sold multi-year subscriptions. GitLab and MongoDB extended this into open core: a genuinely useful free tier drives developer adoption, and enterprise features sit behind a paid wall that monetizes the procurement budgets of the companies those developers work for.

For founders and operators, open core is structurally clever and carries one specific predator. When Elasticsearch became dominant in the AWS ecosystem, Amazon wrapped the open-source code in a managed service without contributing back or paying Elastic, and Elastic, MongoDB, and HashiCorp all changed their licenses in response. The model works only when the free version is genuinely valuable and the paid layer offers something the community cannot practically replicate. Exactly where to draw the line between what you give away and what you charge for is what the app holds back.