How Does Gitlab Make Money? Business Model of Gitlab

GitLab Inc., a San Francisco-based company that provides an online version control system (VCS) called GitLab, has become a major player in the open-software world. More than 100,000 organizations use GitLab to manage their software development projects. Among these include some of the biggest names in technology including Google, Red Hat, IBM, Alibaba Cloud, and Mozilla.

But how does GitLab make a profit? That is the topic of this article. I am writing this article because I wanted to know how GitLab earns profits. Therefore, we can start our journey right now.

GitLab runs on an open-core free/freemium business model. Its main source of revenue comes from subscriptions and paid features for its DevOps platform.

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About Gitlab

GitLab is a web-based DevOps lifecycle management system that offers a git repository manager with wiki and issues management functionality. It is not just a regular Saas or free service, however, because of their slightly different business model.

Business Model of Gitlab

GitLab is an open-code DevOps platform. It’s free software, but there are some paid services available for enterprise use.

Open core models differ from free/freemium models in that they offer a full version for free but require payment for additional features.

Free and open-sourced software (FOSS) means that the software was created by an online developer group and therefore must be free.

However, not all the extra functions and add-ons are free. Some of them are free and some aren’t.

That is how an “open core” model works. The basic package(s) are open source and free; advanced features are proprietary and paid for.

The way the coding aspects improve on the freemium model is that any open-sourced product has access to a wide range of developers because they don’t need to pay for registration and verification for each and every single instance they use their code. They just download it from GitHub and start using it.

An open core business model allows companies to tap into the vast pool of open-source programmers and users who may add enhancements to their products.

Gitlab’s competitors include:

GitHub
CircleCI
Jenkins
Bitbucket
Azure DevOps Server
JFrog Artifactory
CloudBees CI
Jira
ClickUp

Product/Service

GitLab is a DevOps platform built using open-source code. To fully understand what that entails, one must first understand DevOps.

DevOps is a set of practices used by organizations to improve their ability to develop software quickly and efficiently. It focuses on collaboration between developers and operators.

One of the reasons for the existence of DevOps is that there was historically a significant gap between the perspectives of development teams who created code and the operational teams who had to use that code.

Good DevOps platforms automate testing, compliance, security, and so forth. They claim to do this by automating these processes.

Marketing

Open-source software makes it easy for companies to market their products because they don’t need to spend time creating marketing materials.

One of the best ways to market GitLab is by targeting developers who are already using it. If their product is good, they’ll be happy to share it with others.

DevOps and operations engineers will also promote GitLab if they think it has good features.

GitLab also has a lot of important cloud partners who can help them in many different aspects, including marketing. These partnerships consist of companies like Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft Azure, IBM SoftLayer, Rackspace, and others.

AWS
Google Cloud
HashiCorp
Red Hat
VMware Tanzi
IBM

Expenses

Because GitLab is not a physical business, they need to spend less on things like rent, utilities, and employee salaries.

GitLab also has the expense of any other software development toolkit:

Hosting
Payroll for development
Sales

Despite the fact that GitLab is not a physical company, its expenses have increased so rapidly that they’re eating away at its profit margin.

As reported by Pitchbook, GitLab’s revenue has decreased while its costs have increased. Moreover, GitLab has been operating at a loss for longer periods of time.

Plan for Profit

It’s true that GitLab has operated at a net loss for years now, but its recent IPO could mean big changes for the company. Its grand IPO debut was on October 14, 2020, so we’ll need to wait until sometime next year to see if being traded on the stock market will help the company become profitable.

GitLab isn’t in a rush, but they’re aiming to be the most widely used collaboration tool for knowledge workers across industries.

How Does Gitlab Make Money?

GitLab offers these subscription and addon services so that people can get access to their DevOps platforms and Git repositories, which include things like:

Wiki
Issue-tracking
Continuous integration
Deployment pipeline

Originally written in Ruby, it has since been ported to Go. It currently uses technologies including:

Go
Ruby On Rails
Vue.js

It is open source, so it is free for everyone to use. However, its most advanced features may require some payment.

Subscriptions

Plans include unlimited private repositories for free. Additional add-ons are available at an additional cost.

Free

The Free subscription package costs nothing at all. You don’t even need a PayPal account to sign up for this service.

The free trial package includes:

The time span during which the DevOps lifecycle takes place
Open Source MIT license
You can set up your own GitLab CI runners
Free static websites
You need to spend at least 400 CI/CD minutes every

Premium

The annual subscription costs $19 per user or $228 for an entire company.

You get access to the following additional features with the premium membership:

Faster code reviews
Advanced CI/CD
Enterprise agile planning
Release controls
Self-managed reliability
10,000 CI / CD minutes per month

Ultimate

The Ultimate plan costs $99 per user per month or $1,188 annually.

You’ll get everything included in the ultimate package plus:

Advanced security testing
Cloud-native security
Compliance
Portfolio management
Value stream management
Free guest users
You’re doing well if you manage to get 50,000

Add-Ons

With add-ons, users can purchase extra CI/CD hours or repository space for their projects or personal namespaces. Free repository space of up to 10GB is available across all levels.

Add-On options include:

Additional CI/CD hours at $10 per hour. This is a flat fee for any additional CI/CD hours.
You may add additional storage for an extra fee.

Gitlab Funding, Valuation, and Revenue

GitLab doesn’t have a funding issue. Between their $100 million funding in 2017 and their $500 million funding in 2018, they’ve seen an almost fourfold increase in their funding, according to CrunchBase. Three years after their $100 million investment, GitLab has raised $550 million.

By early 2019, GitLab had become the first fully Ukrainian startup company to receive a $1 billion+ valuation. Since then, its value has more than doubled.

According to Pitchbook, revenue has declined by nearly 50 percent since the last fiscal quarter.

Is Gitlab Profitable?

GitLab was founded in 2011 but has not made any profit so far. It is expanding quickly but spends too much time and resources on doing so.

According to PitchBook, GitLab isn’t anywhere close to breaking even.

Since its initial public offering (IPO) in September of 2019, GitLab has actually operated at a net loss. However, this could change since its recent IPO on the NASDAQ in October of 2021.

The thing to understand here is that AWS (Amazon Web Services) is a company that provides services to GitLab. Obviously, AWS is an affiliate of Amazon.com.

Amazon’s business strategy has been to lose money for twenty consecutive years and then use these profits to dominate the market. Once they had achieved dominance, they could charge whatever prices they wanted because there were no other companies left to compete against them.

It may not be possible in a natural market environment, but if your company has a wealthy investor who lets you take losses for 20 years until your competitors go out of biz, you don’t really care if you’re making a profit right now.

Conclusion: What makes GitLab so successful?

We’ve discussed the business models of GitLab and its pricing plans. We’ve also mentioned the funding it has received and its valuation. Finally, we’ve talked about the revenues it generates every year.

While the company primarily makes most of its revenue from software products, it still offers an open-source version of its software for free so developers can use it without having to pay anything.

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