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What is the business model?
Enterprises are right to ask how a vendor makes money. A vendor's business model tells you whether its incentives are aligned with yours, and whether it will still be around - and still motivated to serve you - in ten years. With an open-source company, the question is sharper: if the software is free, where does the business come from, and is it sustainable?
This page answers that directly.
The two common open-source models - and why Frappe uses neither
Open-source companies typically earn in one of two ways:
- Open-core - the basic product is free, but the features that serious users need are locked behind a paywall. You start free and pay to unlock what you actually require.
- Services - the software is free to run yourself, and the company earns by selling support, guarantees, and priority assistance around it.
Both are legitimate. Frappe uses neither as its primary model. Frappe does not lock features behind paywalls, and it does not earn most of its revenue from services.
Frappe's model: hosting
Frappe earns primarily by hosting the software it builds, through Frappe Cloud.
The logic follows the customer's actual journey. Enterprises adopt Frappe's applications as an alternative to expensive, inflexible, licensed software - they want the flexibility and control. But they soon meet a reality that applies to all open-source software: the software may be free, but running it well is hard. A production system with real users and real data needs installation, safe upgrades, backups, monitoring, security patching, performance tuning, and scaling as usage grows.
Frappe Cloud exists to absorb all of that. It is managed infrastructure for Frappe applications, taking responsibility for hosting, backups, upgrades, monitoring, security, and uptime - bundled with first-party application support. It lets your team focus on using the software instead of operating it.
That is what customers pay Frappe for: compute, storage, and the support that comes included.
Watch this video to know more: How does Frappe make money?
Compute-based pricing, not per-user pricing
This is one of the most important commercial distinctions for any buyer, and it is where Frappe departs sharply from conventional SaaS.
Most business SaaS charges per user - every person who needs access is another seat on the bill, whether or not they use the system heavily or at all. Frappe does not do this. Frappe Cloud uses compute-based pricing: you pay for the resources your system actually consumes, not for how many people can log in.
The practical consequences:
- If your usage is modest, your bill stays modest - regardless of headcount.
- As usage grows, cost grows gradually and predictably, rather than stepping up with every new employee.
- For organisations with many occasional or light users, this often produces dramatically lower long-term costs than per-user licensing.
The strategic point underneath the pricing: Frappe does not make money by forcing you to buy more licences. It makes money when your usage genuinely grows. That aligns the vendor's incentive with your success rather than with seat expansion - a meaningful difference when you are signing up for a system you expect to run for years.
Current Frappe Cloud plans and pricing are detailed at frappe.io/cloud/pricing and in Pricing and total cost of ownership.
Watch this video to know more: What is Frappe's pricing methodology?
Where Frappe's revenue comes from
For transparency, this is the approximate shape of Frappe's revenue at the time of writing. These figures are directional and will shift over time, but they show clearly where the business sits:
| Source | Approximate contribution |
|---|---|
| Frappe Cloud (hosting) | ~80% |
| Enterprise services (priority support) | 8–10% |
| Partnership fees | 3–5% |
| Frappe School (training and certification) | 2–3% |
| Other | <1% |
The takeaway for a buyer: the overwhelming majority of Frappe's revenue comes from hosting customers who choose to stay - a recurring, usage-aligned base, not one-time licence sales or locked-in contracts.
Who pays Frappe
Frappe Cloud serves three broad types of customer, which is useful context for understanding the ecosystem you would be joining:
- Partners and consultants rent dedicated or shared servers to host their customers' systems, and pay Frappe for the compute. Frappe grows as they grow.
- Businesses - SMBs and enterprises want modern ERP and business software without licensing costs. SMBs pay for hosting; enterprises pay for hosting plus priority services.
- Developers and product companies build their own applications on the Frappe Framework and host them on Frappe Cloud - earning from their apps while paying Frappe for the hosting.
Different needs, one common foundation: reliable, well-designed open-source software, operated well.
Why the model is sustainable - and aligned with you
It is worth stating the conclusion plainly, because it answers the vendor-risk question directly. Frappe does not earn in spite of being open source; it earns because it is open source - by taking responsibility for everything that comes after the code ships. The model is recurring rather than transactional, aligned with customer usage rather than seat count, and diversified across hosting, services, partners, and training. For anyone weighing long-term vendor stability, that is a healthier foundation than a licence-renewal business built on lock-in.