How Canonical makes money from Ubuntu

No one makes money from open source; you make money ‘around’ open source. Canonical just proved it.

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Among enterprise Linux distributions — SUSE Linux Enterprise Server (SLES), Red Hat Enterprise Linux (RHEL) and Ubuntu — Ubuntu has the shortest life-cycle. SLES offers maintenance updates for 8-10 years, with extended support for 11-13 years. RHEL is supported for 10 years and then there is extended support. Ubuntu’s long-term support (LTS) edition is supported for only five years.

Despite Ubuntu LTS's short life-cycle, many customers use it, especially in the cloud (AWS or Microsoft Azure) or in virtual environments in their datacenters. What sets Ubuntu apart from free-of-cost, community supported distributions like Debian or paid commercial distributions like RHEL and SLES is that customers can use Ubuntu for free on hundreds of machines, but there is also an option to get paid support if needed.

Due to this free/paid business model, Ubuntu’s popularity has grown tremendously over the last few years. It’s actually a dominant distro in the public cloud.

There are three active LTS releases of Ubuntu: 12.04, 14.04 and 16.04. The support for 12.04 is ending this year on April 28, 2017. While Canonical is encouraging users to upgrade to 14.04 or 16.04 LTS, there are still a lot of companies using 12.04.

Customers running critical services on their servers and cloud really don’t like frequent upgrades. They tweak, tune and customize different components of their infrastructure and when you bring in too many changes at the same time with a major release upgrade, something is going to break.

As a result, customers plan upgrades very meticulously. It takes time. These upgrades, while consuming resources, both human and monetary, don’t really add any value to customers or increase sales. There isn’t any ROI from these upgrades, other than keeping your existing infrastructure safe and secure. Upgrades are a necessary evil and not a priority. Companies like to do upgrades at their luxury and not be forced into it. As expected, most companies, with big enough pockets, like the idea of having that luxury of extended support to create a buffer for planning and executing upgrades when they are ready, without worrying about end-of-life (EOL).

This need for buffer creates a business model for Canonical, and Mark Shuttleworth’s company is not missing this opportunity. Canonical is offering extended security maintenance (ESM) for 12.04 LTS, which provides important security fixes for the kernel and the most essential user space packages for the distribution. These updates are not available publicly, they are part of a secure and private archive available to paid customers of the Ubuntu Advantage program.

All those customers who are still running Ubuntu 12.04 have two options, either invest resources towards upgrading from 12.04 and hit the April 27 deadline or pony up and buy the extended life and plan upgrades at their own leisure. Most companies will choose the latter option. According to Canonical, companies like Bloomberg, eBay, AT&T, Walmart, CISCO, etc. are already part of the Ubuntu Advantage program.

So there you have it, a smart move to make money around open source.

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