In open source businesses, your most formidable competitor often isn’t another company — it’s your own freely available product. Unlike proprietary software battles over pricing, features, or marketing, open-source businesses frequently face an uphill challenge in convincing customers to move from free, community-driven offerings to paid, enterprise editions.
Many open source companies have discovered that when it comes time to sell an Enterprise edition, the sales team is often fighting an uphill battle against their offering as many customers with deep pockets usually decide to continue with the free version and invest in custom development. The open source offering becomes the default option — even if the enterprise version packs additional features and robust support.
“We’re Giving Too Much Away” — The Sales Perspective #
Having worked at multiple open source companies, sales told me that we should cut down features in the open source offering. They are not wrong — when we try to sell an Enterprise, the customer often wants to keep using open source and do custom development instead of buying an Enterprise offering. Hence, logically, they form the standard prescription to withhold certain features from the open source edition and reserve them for enterprise users. But strategically removing functionality often backfires. If users perceive intentional limitations, they may simply build their solutions rather than adopt the premium tier. Docker initially faced backlash when it tightened restrictions on Docker Hub’s free tier, prompting developers to explore alternative registries rather than move up to paid plans.
Determining What Goes into Open Source vs. Enterprise #
Deciding which features belong in open source isn’t purely about driving upgrades — it’s about fostering adoption and engagement within the developer community:
- Commoditized Features: If competitors widely offer a feature, withholding it makes little sense; inclusion becomes essential to stay relevant.
- Community Vitality: Features crucial for community momentum, adoption, or attracting new contributors should generally remain open.
More reasons to add features to open source could be to drive developer adoption and community engagement. Much-asked-for updates and features become important to keep your community engaged and for new developers to pick up your open source framework.
Conversely, features are ideal candidates for enterprise tiers when they:
- Address niche or enterprise-specific scenarios
- Provide compliance or security guarantees (e.g., SOC 2, HIPAA, GDPR)
- Offer managed or hosted services that significantly reduce operational complexity.
- Promise high perceived value, such as dedicated support, SLAs, and specialized integrations
GitHub, for instance, differentiates clearly by offering advanced security features, audit logs, and robust CI/CD capabilities in their Enterprise tier — areas highly valuable for compliance-conscious enterprise customers.
Your enterprise offering needs a block and a pull #
In many instances, feedback from sales teams reveals a surprising truth: If customers prefer investing in custom solutions instead of upgrading, it’s often a sign your enterprise product lacks critical pull rather than your open-source product being overly generous. It signals a strategic opportunity to improve the premium offering — enhancing enterprise-grade security, offering managed infrastructure, providing robust customer support, or guaranteeing uptime and reliability.
In other situations, it may be that the open source users never encounter any blocks to extend the value to their companies. For this reason, when GitHub initially launched, they required developers to pay for private repos (this has been changed since as they have matured to other value props)
To summarize,
- The delta of value between the open-source offering and the commercial offering is not large enough for customers to pay for it.
- Once hooked, open-source users must experience a conflict that blocks them from creating value at the enterprise level.
- After experiencing the block, the users must experience a pull (premium features) that goes beyond their current needs and invites them to pay for the product. For instance, Confluent built its enterprise success on robust managed Kafka services, significantly reducing customers’ infrastructure overhead, thus creating a clear, compelling value proposition distinct from the open-source Apache Kafka.
Here are some standard pulls that open-source companies try to add to their premium offering
- Authentication & Authorization: GitLab and HashiCorp offer sophisticated access management to appeal to security-sensitive enterprises.
- Managed Services: MongoDB Atlas and Elastic Cloud offer hosted databases, removing operational overhead for customers.
- Support and SLAs: Red Hat’s entire enterprise model is built on providing guaranteed uptime, security patches, and comprehensive support, which justify enterprise pricing.
Ultimately, thriving open-source businesses don’t succeed by withholding — they win by offering undeniably superior value in their enterprise offerings, clearly addressing enterprise-specific pain points beyond the reach of their open-source counterparts.
This article was originally published on Medium as part of the BoFOSS publication.