New York – – November 03, 2026 -- Egan-Jones Ratings warns that free open-source software and artificial intelligence are weakening software incumbents' staying power, and that some credit models overstate how secure incumbency is. The commentary is addressed to institutional investors and risk managers holding software and platform credit.
Free substitutes cap what incumbents can charge
Egan-Jones finds that open-source products need not dominate a market to constrain pricing. A free alternative limits what an incumbent can charge before it loses significant share. Linux has gained significant share among personal computer operating systems over the past five years, and open-source software holds virtually the entire enterprise supercomputer market.
AI lowers development costs and favors larger contributor pools
AI has cut the cost of development, so a user who wants a feature in an open-source application can build it far more easily. Closed-source applications with few developers must compete against a much larger pool of contributors. Egan-Jones expects some software to become more commoditized.
Consumers switch first, as Android's rise and BlackBerry's collapse show
Consumers face lower switching costs than enterprises. They are more price sensitive, need no deep vetting process and have fewer people to retrain. Google kept Android open source and supplied it to handset makers at no cost, and it outsold every other phone platform while BlackBerry fell to zero.
Customer "hooks" protect Microsoft and Apple
Incumbents that keep winning maintain many "hooks" that tie customers in place, Egan-Jones says. Examples include Microsoft's identity, mail and meeting software and Apple's integrated ecosystem of software and devices. Leaving either would mean a painful process of removing those hooks.
Platform owners win in AI while model sellers face low loyalty
Egan-Jones sees low switching costs and low brand loyalty between AI models, which leaves AI companies to compete on price, intelligence or speed. It names platform owners Microsoft, Google, Amazon and Apple as winners. Single-product licenses and model sellers without a platform are the losers.
The firm concludes that software incumbency lasts only as long as leaving stays expensive.