But how can Open Source software companies give away their code for no money ?
The business model is this:
Proprietary vendors tend to have a small number of customers paying a hefty license fee (sometimes per-user license fee) to use their software. However, those companies make the majority of their profit from other activities - specifically support contracts for the software. These companies also have to spend a significant portion of their turnover on marketing their product to the channel.
The idea with Open Source software companies giving away their product at no charge is that: by giving it away, it reduces the "cost" of potential new customers trying the product out; marketing becomes viral, so Open Source companies save money on their marketing; the number of users becomes huge - okay a number of them will not take out support from the company, but there will be many who do - and so support contracts can be cheaper because there are more customers. As a business, which would you prefer: 100 customers paying you £10,000 per year support, or 10,000 customers worldwide paying you £300 per year ?
If you have the choice of an expensive proprietary piece of software which will encode your company data in a secret format, or similarly spec'd piece of software which is cheaper and stores your data in "open" formats, which are you going to choose ?
So, having explained how the business model works, take the example of an eMail server:
This graph assumes that the cost of a server running a proprietary software package costs the same to set up and install as a server using Open Source eMail software.
With the proprietary package, you have to buy per-user licenses every time your company expands the number of users. With an Open Source eMail server, there are no license fees to pay. The growth of your company is not constrained by having to fork out for per-seat license fees.
You may choose to take a support contract out with the supplier of the Open Source eMail software.