Egan-Jones Examines How Open-Source Software Is Eroding Incumbents' Pricing Power
Egan-Jones Examines How Open-Source Software Is Eroding Incumbents' Pricing Power
PR Newswire
NEW YORK, Nov. 3, 2026
NEW YORK, Nov. 3, 2026 /PRNewswire/ -- Egan-Jones released a commentary examining how free open-source software and artificial intelligence are weakening the staying power of software incumbents. Written for institutional investors and risk managers holding software and platform credit, it finds that incumbency is less secure than some credit models assume.
Even where open-source products do not dominate a market, free substitutes can limit what an incumbent may charge before it loses significant market share. Over the past five years Linux has grown significantly in share among personal computer operating systems, and open-source software holds virtually the whole market among enterprise supercomputers.
AI is a central driver. Egan-Jones observes that AI has lowered the cost of development, so a user who wants a feature in an open-source application can now build it far more easily. Closed-source applications with few developers must therefore compete against a much larger pool of contributors, and the commentary expects some software to become more commoditized.
Consumers tend to move first. Compared with enterprises, they face lower switching costs because of greater price sensitivity, no need for a deep vetting process and fewer people to retrain. Google's decision to keep Android open source and provide it to handset makers at no cost helped it outsell every other phone platform, while BlackBerry fell to zero. Incumbents are not defenseless. Firms that keep winning, Egan-Jones finds, maintain many "hooks" that tie customers in place, such as Microsoft's identity, mail and meeting software and the integrated Apple ecosystem of software and devices. Leaving either would be a painful process of removing those hooks.
Applied to AI itself, the commentary sees low switching costs and low brand loyalty between models, which leaves AI companies to provide value in price, intelligence or speed. It names platform owners such as Microsoft, Google, Amazon and Apple as winners, and single-product licenses and model sellers without a platform as losers.
Egan-Jones concludes that software incumbency lasts only as long as leaving stays expensive. Open-source applications cap what incumbents can charge, consumers usually move first, and AI is lowering the cost of switching. The commentary offers institutional investors and risk managers a framework for assessing these pressures.
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