International Business Machines Corp.’s hefty $34 billion deal to buy Red Hat Inc. is the biggest proof yet that the 20-year-old movement of free and open software can lead to a real revenue-generating business, thanks to new advances in technology.

In the case of IBM IBM, +0.72% , an early participant and supporter of the open-source movement, its planned acquisition of Red Hat US:RHT is expected to add at least $2.6 billion in much-needed new revenue to a once again declining sales total. That agreement comes after three huge deals for open-source companies this year: Cloudera Inc. CLDR, +1.50% and Hortonworks Inc. US:HDP agreed to a $5.2 billion all-stock merger; Salesforce.com Inc. CRM, +2.18% bought Mulesoft Inc. for $6.5 billion; and Microsoft Corp MSFT, +2.27% made a $7.5 billion deal for GitHub.

The wave of deals proves two points. One is that open-source software is more than just a group of far-flung global developers contributing code to projects in their spare time. Twenty years after the term “open-source” was created and became a movement, companies are being founded that are able to earn revenue by adding value to many open-source projects. Cloudera, for example, distributes secure versions of Apache Hadoop and other open-source software. Red Hat is best known for its corporate version of Linux, Red Hat Linux.

“Ten years of experience through trial and error have resulted in more refined strategies and business models, most of which have used a variety of methods to successfully harness the benefits of open source while capturing the economics of proprietary models,” wrote Edward Parker, an analyst at BTIG, in a report earlier this month called “Unlocking the Open Source Puzzle.”

See also: Software stocks jump as analysts bet ‘surge of cloud M&A’ could follow IBM/Red Hat

The other point is this next phase of cloud computing, called hybrid cloud, is going to be increasingly made up of open-source software. Hybrid cloud refers to companies having a mix of data on their own premises in a private cloud as well as in a public cloud — such as Amazon.com Inc.’s AMZN, +2.49% Amazon Web Services or Microsoft’s Azure.

IBM Chief Executive Ginni Rometty told analysts on a conference call Monday morning that the No. 1 thing customers are telling IBM is that they want to be able to move their corporate data “across multiple cloud environments with no lock-in.”

“That’s what the two of us do together,” Rometty said, referring to IBM and Red Hat.

IBM needs to get its revenue growing again. After two brief quarters of revenue growth, boosted mostly by a surge of revenue from a new mainframe system, it fell back into a revenue decline last quarter despite touting cloud and artificial intelligence as its way to future growth. But the public cloud business is now dominated by AWS and Azure, so IBM needs to look beyond the public cloud for new growth.

Beyond Red Hat: Here are other cloud companies that could be takeover targets

Rometty noted in the call that IBM’s surveys indicate that its clients have only moved 10% to 20% of their workloads to the cloud, and that hybrid cloud can be more successful, with better options for customers afraid to completely move all data.

“IBM has been trying to tackle this for some time,” said Forrester Research analyst Chris Gardner. “Their cloud offerings are pretty weak. They are trying to position this as a solution to dive deeper into hybrid. This helps them to move into hybrid cloud.” Analysts said open-source software is more modular and flexible for companies trying to move data securely from one cloud to another.

Red Hat US:RHT was founded in 1993, just two years after Linus Torvalds publicly released the kernel of the Linux operating system, a free version of software that was like Unix, the secure and costly operating system developed by AT&T Labs and used for workstations and high-end servers by corporate giants from Hewlett-Packard Co. to IBM. Red Hat Linux was released on Halloween of 1994, and a few years later, Red Hat was among the first companies in the open-source arena to go public — and one of the few that survived.

“Even though they have been acquired, Red Hat is always going to represent the answer to, ‘how do you make money if you give the code away?’” said Jay Lyman, an analyst with 451 Research. “They are an open-source developer model. At the time they started, open-source was kind of hobbyist and niche.”

Don’t miss: IBM’s record offer for Red Hat leaves analysts doubtful, but still speculating on bidding war

IBM was also an early supporter of Linux. In the early days, hundreds of IBM software developers were contributing to Linux in their spare time, and in 2000, the company said it would adopt Linux and made a $1 billion investment to support it on IBM servers, software and in services.

In a blog post after the IBM deal was announced Sunday, Red Hat’s president of products and technology Paul Cormier recapped its history.

“Passion alone among open-source enthusiasts would never have made Red Hat (or Linux) a player in enterprise software,” Cormier wrote about the company’s “bet the farm” decision in 2002. “We moved away from our freely downloadable and boxed Red Hat Linux, replacing it with an enterprise subscription model and retaining the open-source principles of freedom while creating a long-term sustainable business model.”

Now a big question remains if IBM can truly leave Red Hat alone, as it promises to, so its products can remain independent from any competitive offerings, such as IBM’s AIX (a version of Unix). A culture clash could also ensue between staid Big Blue and developer-driven Red Hat, where widely dispersed developers are used to working at home.

“The culture mesh will certainly be a challenge,” said Lyman. But he agreed with many on Wall Street that the deal opens up a new era for open-source software companies, from both an acquisition perspective and for a corporate use case.

“With this being a validation of open-source software, this might make any number of companies based heavily or centrally on open source more attractive, or face less trepidation from businesses spending money on open-source,” Lyman said.

Investors will not know for some time how the deal to buy Red Hat will work out for Big Blue. But it’s becoming clear that open-source software companies are going to play a big role in the development of hybrid cloud, which may be the next big growth phase of cloud computing.