
How to make $100k in Open Source by working hard - trustfundbaby
http://www.mikeperham.com/2013/10/01/how-to-make-100k-in-oss-by-working-hard
======
patio11
I think there are likely a variety of contractual options other than "24/7
phone support" which businesses would be happy to pay for, on an ongoing
basis. For example, you could charge $500 plus $100 per year for
"maintenance", and not be any more specific than "the software will be
maintained in an ongoing fashion", and now you won't be starting from $0 next
January 1st. As someone who has started from $0 every January 1st for the last
7 -- don't do it! It sucks!

Congrats, though -- Sidekiq is one of the few commercial OSS offerings that I
know of doing well in the Ruby/Rails ecosystem. Most of the others just act as
friendcatchers for consulting, too.

~~~
WestCoastJustin
> charge $500 plus $100 per year for "maintenance", and not be any more
> specific than "the software will be maintained in an ongoing fashion"

I work at a mega corp, and I cannot echo this enough, we have tons of
"maintenance" agreements for hardware and software of all sorts, $100 is not
even in the noise level for some of these agreements! Software needs to be
maintained, get this done upfront, it is a total pain in the but to have
something fail, and then try and push through a purchase for "maintenance"
after the fact. This means that I have to get a quote, get my boss to sign
off, get purchasing in the loop, etc, etc. Just have this as an annual
agreement and it will get processed like everything else. 10 years later,
someone will ask, who uses this, and no one will know, and it will get
renewed, just because they don't want something to fail ;)

~~~
eru
And since the bureaucratic overhead is so high, you better ask for enough
money to make it worthwhile.

~~~
GFischer
Remember the often quoted advice from Joel Spolsky:

[http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...](http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html)

Enterprise sales cycle is EXPENSIVE, so, while the actual cost of your service
may be much less, you have to pay for the ten airplane flights and meetings
and hotel rooms before you close your sale (and add a few one afterwards for
good measure).

also

[http://cdixon.org/2010/02/06/selling-to-
enterprises/](http://cdixon.org/2010/02/06/selling-to-enterprises/)

"Enterprise-focused VC’s sometimes refer to products priced between (roughly)
$5k and $100K as falling in the “valley of death.” Above $100K, you might be
able to make a profit given the cost of sales. Below $5k you might be able to
market your product, hence have a very low cost of sales"

I'm not sure if all of that advice applies to a Ruby gem... big freaking
enterprises don't use Ruby that much.

That said, it's a great success story :)

~~~
marcosdumay
Does that point stands when people can freely start using the software, and
enterprises decide to buy support because they are already using the product?

Somehow all that process must work for buying paper clips and pencils. Yeah,
they buy those in huge amounts, but I can not conceive that they pay much of a
premium. I know that governments have streamlined process for those
situations. Don't corportations also have shorter procedures?

~~~
GFischer
I think many sane ones do have a corporate credit card for small purchases.

But others don't, the one I work for has a generic process for
software/development tools, which must be budgeted for one year in advance.

------
justin_vanw
The title of this article is the opposite of what the article says.

He made almost no money with open source. He made tons of money by withholding
features from the open source library and instead only offering them under a
commercial license as an add-on. Since this is itself a violation of the LGPL,
anyone using the Pro version isn't even using open source at all, as both the
original and Pro enhancements are at that point licensed with a commercial
license.

An accurate title would be: "How to make $100K by writing an open source
library, waiting for a lot of people to build a product using it, then holding
back essential features until they pay you money, which they will do because
they are suffering lock-in and it's way cheaper to pay you than pay a
developer for dozens of hours of work to adopt an open source solution."

~~~
tedunangst
Violation of the LGPL? By the author?

~~~
informatimago
The GPL licenses do not prevent the owner of the copyright to release other
copies under another license.

~~~
jrallison
Technically, Sidekiq Pro isn't a copy. It's a set of plugins designed to
integrate with the open source project.

~~~
tagawa
In which case, maybe it's classified as a derivative work of the original OS
project? This is how WordPress tries to classify third-party themes and
plugins, meaning they should "thus inherit the GPL license". See:
[http://www.wordpress.org/about/license/](http://www.wordpress.org/about/license/)

------
mariusz79
First, the title is simply wrong. The OP did not make 100k with Open Source,
he made 100k selling something that's an addon to his LGPL based offering.
Another part of the package is a commercial license bundled with his software.
Of course there is nothing wrong with that, but saying that he made money in
os is just plain wrong, IMVHO.

>>In nine months of selling commercial licenses, I sold 33 for $1,650. If you
figure I spent 300 hours building Sidekiq, that’s less than minimum wage.
Result: failure.

Second, If the money was only reason why the OP build the software then I have
to agree that this is a failure. If on the other hand sidekiq was used in some
of this own projects, he should also calculate how much time/money he saved by
creating it.

~~~
Confusion
Why do you object to calling this 'making money with Open Source'? I agree
that "making money by developing and selling closed source extensions to open
source products" is 'making money with Open Source'. Especially considering he
also developed and maintains the OS product.

~~~
6cxs2hd6
Because it seems similar to claiming prostitutes make money by greeting people
and chatting. Although they do greet and chat for free, what they actually do
for money is different.

Note: I believe prostitution is a morally acceptable profession for consenting
adults. Therefore I'm not choosing that analogy to be pejorative to the OP;
I'm choosing it to be blunt. IMHO the OP is doing nothing wrong, and more
power to him. I just agree with GP that the characterization of it as making
money "from" open source is confusing.

~~~
DennisP
Well for legal reasons, many of them do claim to charge money for the greeting
and chatting, and whatever two consenting adults happen to do after that is
their own business.

It's true that they probably couldn't charge for the greet and chat if it
weren't for what they do for "free." It's also true that Mike Perham probably
couldn't charge for his commercial work, if not for what he did for free.

Admittedly this is a rather loose analogy.

------
mmahemoff
Charging a flat rate ($500) per company is leaving a lot of cash on the table.
Have you considered a tiered model based on number of servers in use?

As well as increasing fees from Megacorps, the flipside is you could also
offer discounts to non-profits, early startups, and so on, and in exchange for
links on their homepage.

~~~
VLM
The authors article is good although it misses a tiny little detail when
calculating hourly costs. Its not just his $100K/700 hours = pretty good, its
also his customers thinking, hmm, it took a specialist 700 hours, so it going
to take our busy guys 1000 hours part time, and our guys are already busy, and
he's only asking $500, thats a bargain at 50 cents per hour to replicate...

Now if you start demanding $5/hr from each customer then the outsources in
India are going to start eating into your sales when they take the work inside
or just figure out a work around that doesn't take 1000 or 700 hours.

Another interesting issue is signing budgets. I have no use for this
particular example but my boss can sign off on $500 at pretty much any mega
corp I've worked at, but if you demand annual auto-renewal ongoing charges or
get into the mid 4 figures suddenly you have to convince a heck of a lot more
people than me and my boss. If you're charging more than a conference or a
training class, or you're demanding annual payment, its going to be a harder
sell for megacorps. Sure the code monkey and his boss might love it, but now
you need to convince additional bean counters who think ruby is a precious
stone and its all downhill from there. You could try to corporate speak market
it to get past the bean counters with lots of babble about proactively
leveraging the synergy of the enterprise cloud platform but that risks
repelling the code monkey and his boss, a fine line to walk.

------
zem
Really impressed by how customer-friendly the licensing is:

> How many licenses do I need to buy?

> Every organization that runs Sidekiq Pro for their own benefit must purchase
> a license.

> GitHub runs *.github.com. They need one license for their entire site.

> GitHub sells GitHub Enterprise to various customers. They need one license
> per customer because the product is installed and run locally by the
> customer.

> Pivotal Labs builds websites on behalf of customers. They need one license
> per customer because the customer is the one getting the benefit of Sidekiq.

------
shutupalready
If your story is true, then stop talking about it already!

First,

Since you're in the U.S.A., you'll be getting into the 40-50% marginal tax
bracket with federal, state, and Self-Employment Taxes. If you incorporated in
an off-shore jurisdiction, you'll keep all your money. In your situation, it's
completely invisible to your corporate customers where you are located. If
they're willing to pay random guy in Portland, Oregon, they'll pay random
company in Singapore (for example). You could even disclose the existence of
the foreign company to the tax authorities. In that case, don't draw a salary
or a dividend from the foreign company, and you'll still pay no U.S. tax. Let
the company pay for your "business travel", "business expenses", etc. And
otherwise just let the cash pile up in the foreign account.

Second,

I highly doubt you'll gain additional customers through your blog. It sounds
like you get customers because they are already using the open source
component, and discover they could benefit from the paid component. Your
article about the $100k gets you hacker cred, but also draws competition. Blog
about the open source component, and keep mum about the dough.

Good luck.

~~~
GFischer
I upvoted you because it's an interesting dissenting opinion, and I've always
wondered about whether the upside of being open beats the downside of
additional competition.

We also don't know whether he paid taxes on the income (I also guess not),
and, most importantly, whether his blog post will bring him additional
revenue.

Do you have many examples where blogging about success brought about
competition? Are there big barriers of entry to building what he built? It
looks like you'd need at least 700 of developer hours, I wouldn't do it
lightly.

OTOH if I had found an easy way to beat the lottery I wouldn't blog about it
:P

~~~
runako
>> We also don't know whether he paid taxes on the income (I also guess not)

Mike is an upstanding citizen and member of the open source community. There's
absolutely no reason to make unfounded claims like this against his integrity.

~~~
GFischer
I'm sorry, you're right. I should not have assumed otherwise.

------
mperham
Author here, thanks for the kind words. Always nice to wake up to a DDoS of my
site at 2AM. :-)

Recurring revenue is a pricing change I'm seriously considering, I just don't
have a payment system in place that can manage my customer list and handle the
annual CC charge.

~~~
purephase
Just have to say, Sidekiq and Dalli are two gems that I view as essential in
the Rails toolkit. Thanks for your work in those areas.

------
egil
"How to make $100k in Open core" would be a better title imho. After all, he
makes his earnings from the pro additions, not the open part.

------
geff82
"Making Money in Open Source" can have several meanings. Selling software is
just what most people think of when reading the title. I myself can say I made
about $150k in Open Source this year. But it wasn't by selling software, it
was by doing freelance jobs and consulting that involved free software only.
Money wasn't coming in on autopilot, I had to get up every day and go to work
at several places. But for me, free software is the reason I live a very
comfortable life, doing things I love to do. It just isn't selling software,
but everything else around it. I always tell my friends that I am the perfect
example that Open Source brings in more than enough money.

~~~
chc
I can't figure out how the license on the software is relevant to this story.
It seems like you could just as easily tell this story to relate how well a
lucky money-making charm works. The charm did not make you money; the hours
you put in consulting did. I mean, this doesn't give me any reason to open-
source any software I write outside of a specific contract to do so.

------
davidw
He made that money with proprietary software based on the open source
software.

No scarcity, no money, it seems: [http://journal.dedasys.com/2007/02/03/in-
thrall-to-scarcity](http://journal.dedasys.com/2007/02/03/in-thrall-to-
scarcity)

------
shmageggy
Having a large picture of someone's face staring at me next to the text
distracts me, creeps me out, and makes it very difficult for me to read. Lots
of tech blogs have this anti-feature but this one is particularly egregious.

------
WestCoastJustin
For anyone that is interested, Sidekiq was featured in a RailsCasts episode
#366 [1].

[1]
[http://railscasts.com/episodes/366-sidekiq](http://railscasts.com/episodes/366-sidekiq)

------
t0
Loading very slow. Mirror:
[http://i.imgur.com/5eq7rZk.png](http://i.imgur.com/5eq7rZk.png)

------
wellboy
So how do I make $100k in Open Source now?

~~~
babuskov
That's a $100k question ;)

------
javert
Is there a good data source of open source-based jobs and how to get them?

Clearly there is a massive open source economy. I would like to understand
that better.

~~~
lgomezma
I'm also interested on this!

~~~
javert
I really wish someone would do a PhD dissertation on it, or write a book on
it, or something. I guess it's likely that there's something somewhat like
what I'm looking for out there already.

------
quaffapint
So who provides support for the base product? My concern with the free and
'enterprise' version of products, is support for the free.

You could say just community support, but then if things aren't getting fixed
either you end up fixing them or your product gets a bad name. If you provide
email support, you're tying a lot of your time to the free product.

Just curious how others handle this.

~~~
chc
I'm sure that he'd be willing to offer support if you wanted to pay for the
support.

------
bdcravens
I'm a big fan of Sidekiq, and the model he's chosen. Some of the features
implemented in the free version (retries with logarithmic logic as to timing,
scheduled tasks) could possibly in a paid version, and the price point for the
Pro version ($500) is a bit bold.

~~~
karamazov
$500 for an entire corporation is very low - that's one day's worth of
developer time. How much developer time would you need to replicated Sidekiq?

------
jakobe
Big thanks to the author for posting this, and for including some actual
numbers!

This is also exciting because it shows that you can make money directly with
an open source product, instead of making money with services surrounding a
product.

------
rustybones
Can someone help me understand whether he's the only one allowed to build a
paid service over the open source code, or could anyone technically take away
all his open source code and build the same service he provides in the pro.
Because if he doesn't have that control, then this is really not making money
with open source but rather relying on existing open source to make money

~~~
informatimago
As a non owner of the copyright, but beneficiary of a GPL license, you would
be allowed to make a derived work (your own "pro" version), and to distribute
it (to sell it), but it would have to be under the GPL.

In this case, since it is a library under the LGPL, you could make a client
product using this library, instead of a derived work, and you could
distribute this product under your own terms, but if you provide the library
along, you must of course keep this library under the LGPL (and provide the
sources of the library).

So with the LGPL, you are free to make competiting proprietary products.

------
hcopr
It's encouraging to hear this can work. Of course that guy was extremely
fortunate to be making something everyone was interested in, so it's still a
risk (but then again: what isn't?).

~~~
concerto
You say fortunate, I say foresighted. In any event. I imagine that he started
building it to meet his own needs and the growth of revenue now is a happy
side-effect.

~~~
hcopr
It's probably always a bit of both, but I'd say that level of success doesn't
come without the necessary context (several things have to conspire for it to
happen). Anyway, it's an inspiring story!

------
spidaboy7
is it me or the link is broken?

~~~
msmithstubbs
It's loading very slowly. Try:

[http://www.mikeperham.com.nyud.net/2013/10/01/how-to-
make-10...](http://www.mikeperham.com.nyud.net/2013/10/01/how-to-make-100k-in-
oss-by-working-hard/)

------
avty
Or you can join Google and make close to 250k a year as a new grad...

~~~
jacalata
Cite?

