Is Open Source Dead? Rethinking the model in the age of AI

Open source has been one of the core building blocks of the Internet for decades. From operating systems to networking tools, it enabled faster innovation, broader collaboration, and lower barriers to entry.

However, as AI reshapes how software is built and infrastructure becomes easier to deploy and operate, the role of open source is being questioned. Has the model reached its limits, or is it simply entering a new phase?

To explore this, IPXO Co-Founder Vincentas Grinius hosted a webinar with Zach Smith, Co-Founder and CEO at Datum. The discussion focused on how open source is evolving, what challenges it faces today, and how companies should approach it in a changing technological landscape.

Open source is not disappearing, but its role is changing

One of the key takeaways from the discussion is that open source itself is not in decline. In fact, from a technical perspective, it is more influential than ever.

Modern AI systems are heavily trained on open source ecosystems, and developers today rely on open frameworks, libraries, and tools to build increasingly complex systems. In that sense, open source continues to accelerate innovation.

At the same time, the business layer around open source is becoming more uncertain.

As Zach Smith pointed out:

This shift fundamentally changes how companies create and capture value.

Why traditional software advantages are disappearing

For a long time, companies competed by building better software or by operating it more efficiently than others. Startups gained an edge by moving faster than large enterprises, while SaaS companies differentiated themselves through operational excellence.

Today, both of these advantages are eroding.

AI-assisted development allows individuals and small teams or any experienced AI software development company to produce high-quality software at speed. At the same time, cloud infrastructure and managed services have made it significantly easier to deploy and run applications at scale.

As a result, the ability to build or run software is no longer a strong moat. What used to be a competitive advantage is quickly becoming a baseline expectation.

This forces companies to rethink where real differentiation comes from.

Open source as a distribution and adoption mechanism

Historically, one of the strongest benefits of open source has been distribution.

By making software freely available, companies could achieve widespread adoption without traditional sales processes. Users could test, integrate, and rely on the product before any commercial relationship was established.

This allowed open source companies to:

• validate product-market fit early
• build trust with users
• create ecosystems around their products

However, the follow-up strategy – monetizing through hosting or SaaS – is becoming less reliable. As infrastructure becomes easier to operate, customers are less dependent on vendors to run software for them.

This weakens one of the core monetization paths that open source companies relied on in the past.

The impact of AI on development and community

AI introduces another layer of complexity to the open source model.

Traditionally, open source relied on community contributions to improve and maintain software. While in practice, most contributions often came from a small group of maintainers, the broader community still played a role in testing, feedback, and incremental improvements.

With AI, the dynamics are shifting.

Developers can now generate code, fix issues, and build features without relying as heavily on external contributors. In some cases, a single developer equipped with AI tools can achieve what previously required a team.

This does not eliminate the value of community, but it changes its role. Contribution is no longer the only way to accelerate development, and community size is no longer directly tied to velocity.

Why open source is not a business model

A critical point raised during the webinar is that open source should not be treated as a business model in itself.

Instead, companies need to clearly define how they create and capture value. Open source can support distribution, trust, and adoption, but it does not automatically translate into revenue.

Organizations need to answer key questions early:

• who is the target customer
• what problem is being solved
• where monetization happens

Without clear answers, open source can become difficult to sustain, especially as competition increases and traditional SaaS advantages decline.

The importance of governance and participation

Another practical consideration is the level of involvement required when using open source.

Relying on open source for business-critical systems without participating in its development or governance can introduce significant risk. Projects may evolve in ways that do not align with business needs, or critical issues may not be addressed in a timely manner.

In many cases, organizations must either:

• contribute directly to the project
• influence its roadmap
• or develop internal expertise to maintain and adapt it

This means that open source is not truly “free”. It requires ongoing investment and engagement.

The bigger shift in how companies should think about open source

The discussion ultimately highlighted a broader shift.

Open source is no longer a standalone strategy. It is part of a larger approach that includes ecosystem building, distribution, and service-based value creation.

Companies that rely solely on open source as their differentiator may struggle. Those that integrate it into a wider business model are more likely to succeed.

The long-term outlook

Open source is not dead, but the way companies use it is changing.

Its role is moving away from being the primary competitive advantage and toward being an enabler within a broader strategy.

For organizations operating in modern infrastructure environments, understanding this shift is essential. Those who adapt will be better positioned to navigate the next phase of the Internet’s evolution.

FAQ