Egan-Jones — a company that offers “offers timely and accurate credit ratings and proxy services” — has 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 don’t dominate a market, free substitutes can limit what an incumbent may charge before it loses significant market share. Here are some highlights from the report:
° 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 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.
Article provided with permission from AppleWorld.Today
