How the "Open Core" Model Works: Free vs Paid Features
How the "Open Core" Model Works: Free vs Paid Features
Most successful open source companies use the "open core" model. Here's how it works — what you get for free, what costs money, and why it's the dominant OSS business model.
What Is Open Core?
Open Core = Free open source product + Paid premium features/services
The core product is fully functional and open source. Premium features — typically enterprise needs — are proprietary and paid.
How Companies Split Free vs Paid
The Typical Split
| Free (Open Source) | Paid (Commercial) |
|---|---|
| Core functionality | SSO / SAML |
| Self-hosting | LDAP / AD integration |
| API access | Audit logs |
| Community support | Advanced permissions |
| Single-team use | Multi-team / org management |
| Basic integrations | Priority support |
| Standard auth | Custom branding / white-label |
| Data export | SLA guarantees |
| Managed cloud hosting |
Real Examples
Mattermost
| Free | Paid (Enterprise) |
|---|---|
| Unlimited users | SAML SSO |
| Unlimited messages | AD/LDAP groups sync |
| File sharing | Compliance exports |
| Integrations | Guest accounts |
| Custom branding | High availability |
| Mobile apps | Advanced permissions |
| Price: $0 | Price: $10/user/month |
Plane
| Free (Community) | Paid (Pro/Business) |
|---|---|
| Unlimited users | Advanced analytics |
| Issues, cycles, modules | Custom workflows |
| Pages (docs) | Intake forms |
| Custom properties | Advanced permissions |
| GitHub integration | Priority support |
| Price: $0 | Price: $4-9/user/month |
Supabase
| Free (Self-Hosted) | Paid (Cloud) |
|---|---|
| All features | Managed hosting |
| PostgreSQL | Auto-scaling |
| Auth | Branching |
| Storage | Point-in-time recovery |
| Realtime | SOC 2 compliance |
| Edge Functions | SLA |
| Price: $0 | Price: $25-599/month |
Cal.com
| Free (Self-Hosted) | Paid (Cloud) |
|---|---|
| All event types | Managed hosting |
| Booking pages | Teams management |
| Integrations | Round robin |
| API access | Routing forms |
| Custom branding | Cal.com atoms (embedded) |
| Price: $0 | Price: $12-37/user/month |
The Three Revenue Streams
1. Managed Cloud Hosting (60-70% of revenue)
Most customers pay for convenience, not features:
- No server management
- Automatic updates
- Automatic backups
- Support included
- SOC 2 / compliance certifications
Who pays: Teams without DevOps, startups wanting to move fast, enterprises needing compliance.
2. Enterprise Features (20-30% of revenue)
Features that only large organizations need:
- SSO / SAML (companies require it for security policies)
- LDAP / AD sync (syncing with existing identity providers)
- Audit logs (compliance and security tracking)
- Advanced permissions (fine-grained access control)
- SLA (guaranteed uptime and response times)
Who pays: Enterprises with 100+ users and compliance requirements.
3. Support and Services (5-10% of revenue)
- Priority support with response time guarantees
- Custom development and integrations
- Training and onboarding
- Migration assistance
Who pays: Large enterprises and government organizations.
Is Open Core Fair?
The Argument For
- Core product is genuinely free and useful
- Anyone can self-host with full functionality
- Enterprise features fund development of the free version
- Users benefit from the company having sustainable revenue
- The alternative is the project dying or going fully proprietary
The Argument Against
- "Feature gating" can be frustrating (SSO is a security feature, shouldn't be paid)
- Some companies put increasingly important features behind paywalls
- The line between "core" and "enterprise" is subjective
- Community contributions improve the paid product too
The SSO Debate
The most controversial open core decision: making SSO a paid feature.
Companies that gate SSO: Mattermost, GitLab, many others Argument: SSO is an enterprise compliance feature, not a core need Counter: SSO is a security feature that all organizations should have
Some projects (like Authentik, Keycloak) offer SSO as a core feature because authentication is their purpose. For tools where SSO is one of many features, it's typically enterprise-only.
Open Core vs Other Models
| Model | How It Works | Examples | Sustainability |
|---|---|---|---|
| Open Core | Free core + paid enterprise | Mattermost, GitLab, Supabase | High |
| SaaS Only | Hosted service, code may be open | Plausible, PostHog | High |
| Donations | Community-funded | Wikipedia, curl | Low-Medium |
| Support-Only | All code free, sell support | Red Hat (pre-IBM) | Medium |
| Dual License | AGPL free, commercial license paid | MySQL (pre-Oracle) | Medium |
| Foundation | Non-profit stewardship | Apache, Linux Foundation | High (for infra) |
Open core dominates because it aligns incentives: the company invests in the free product because it drives enterprise customers.
How to Evaluate Open Core Tools
Green Flags ✅
- Core product is fully functional for small/medium teams
- Enterprise features are genuinely enterprise-specific
- Active development on the free version
- Transparent about what's free vs paid
- Self-hosting documentation is maintained and current
- Community contributions are welcomed and merged
Yellow Flags ⚠️
- Important features moved from free to paid recently
- Self-hosting docs are outdated or hidden
- Cloud-only features that could work in self-hosted
- Community PRs ignored or slow to merge
Red Flags 🚩
- Core features being moved behind paywalls
- Self-hosting made deliberately harder
- License changes without community input
- Managed cloud is significantly better than self-hosted
- Company discourages self-hosting
The User's Decision Framework
| Your Situation | Best Option |
|---|---|
| Small team, has DevOps | Self-host free tier |
| Small team, no DevOps | Use managed cloud (paid) |
| Enterprise, compliance needs | Buy enterprise license |
| Evaluating the tool | Self-host free, then decide |
| Price-sensitive | Self-host, always |
The Bottom Line
Open core works because it's a fair trade:
- For users: You get a genuinely useful, fully functional product for free. Self-host it, modify it, use it however you want.
- For companies: Enterprise customers fund development. The free product is marketing and community-building.
- For the ecosystem: Sustainable funding means the project keeps improving.
The key is evaluating whether the free tier is genuinely useful or just a demo. The best open core companies give you 90%+ of value for free — and that's exactly what makes their enterprise tier worth paying for.
Compare free vs paid features across all open source tools at OSSAlt.