Eran Hammer discusses justifying the return on investment for open source development at Walmart Labs:

If this all sounds very cold and calculated, it’s because it is. Looking for clear ROI isn’t anti-community but pro-sustainability. It’s easy to get your boss to sponsor a community event or a conference, to print shirt and stickers for your open source project, or throw a release party for a new framework. What’s hard is to get the same level of investment a year, two years, or three years later.

If you're creating something that the community relies upon, it's important to also make it sustainable. Open source is a license and a way of thinking about distribution; it is not the opposite of thinking about software in business terms. If you're creating software in the context of a business, you need to tie it to business goals, including the license.

At Known, like Elgg before it, we know that open source distribution acted as a multiplier for the small teams of developers writing the code in-house. We talk about it as a strategy. The effect is the same - anyone can pick up our core code for free - but it's been done for a reason. Eran's metrics seem about right to me:

For example, every five startups using hapi translated to the value of one full time developer, while every ten large companies translated to one full time senior developer.

For us, a "startup" could be a university, a non-profit or a government department. The nice thing about open source is that while all good software is built in collaboration with its users, here the users can literally write some of the code. The result is a startup less constrained by limited resources, and a user-base that gets to use a more useful application. Everybody wins.

Interested in open source businesses? You should check out Known and add yourself to the beta list.