Open Source Software is free by virtue of that fact that one can take the software and reuse it, so how is it that many companies can consistently make money in the open source space? If you are starting work on an open source project and are wondering how it can be monetized, these are four of the business models I've seen
The Tailor Model
In this model, your open source software is a piece of cloth. Now with cloth, virtually anyone can get a hold of some, and there is no patent on cutting up that cloth to make, say, a shirt. And yet, despite there being no barrier or copyright on ownership for shirt-making, why is it that only a few people are tailors?
Your open source software is a lot like that cloth. Again, anyone can download Wordpress, Drupal, Node.js, Django, and so on. And yet, most people do not want to bother taking the exhaustive amount of time needed to learn a project - they just want something that works, now. And you, as the code tailor, deliver them that convenience at a fair price.
The Platform Model
You are likely familiar with Software-as-a-Service, in the sense that you visit software in a browser, without ever installing it on your machine. Some of these are "free," like Google Drive (in reality they read everything you write), and many are paid. Unlike the Tailor, you are working more as a shirt-making factory: the Platform model focuses on a consistent product, that can handle a large number of people at a low price.
If this is a model you find interesting, check out our posts on scaling websites, as this is a critical part of a Platform type project.
The Add-On Model
Now in this case, imagine you already have a community of people who are using an open source product just fine, and for the most part they don't need you. But it turns out that there is this one last thing that would really put some sites over the top and make them great, but nobody has made something for it yet. In this case, you can write a simple proprietary add-on that meets that need, and you sell the add-on. In the web dev world, this is most often seen with themers selling ready-made themes, and Wordpress in particular is known for having a large number of premium plugins available in its market place.
If you find yourself repeatedly coding a little module or plugin to solve a problem, you might have a candidate for this model.
Finally, the Thought Leader
Could there be a way to make money where you make a free add-on, and where most users will use it without ever talking to you? Why, yes! If you are the leader of a big open source project, or you have written an add-on that is very popular, you can become a Thought Leader. In this case, you might want to get people onto your particular Platform, or you want to be a Tailor for big projects. By regularly creating good content, and writing good Add-Ons, people will come to you when they have needs that require your unique expertise to solve.
One example of this model in action would be Commerce Guys, which was founded by the original writer of the Drupal Commerce Module. Anyone can go download Commerce for free, but when the founder speaks, people listen, and those who are able will go to them first with questions. Another case in the Drupal space is Acquia, which was started by the original writer of the Drupal CMS himself. I remember one corporate project I was on in particular, where the company willingly paid double the money for the same level of hosting at a previous vendor, simply because Acquia was considered to be the true expert.
This kind of expertise takes time to build, but if you have the goal in mind, after a few years of consistent contribution will get you there.