Egan-Jones: Open Source and AI Erode Software Incumbents' Moats
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.