Open source AI models are cheaper than closed source competitors and perform on par, so why aren't enterprises flocking to them?

"Drawing on data from OpenRouter, closed models account for around 80% of overall usage globally while also generating roughly 96% of revenue. This dominance isn't driven by a "substantial performance gap", however. In fact, open models "routely achieve 90% or more" of the performance of closed counterparts. These models also benefit from "significantly lower prices" compared to closed models, researchers found, with operational costs up to 84% lower."

"In a detailing the research, Nagle said developers typically opted for closed options "even when an open model both performs better and costs less" and identified a range of factors that influenced this decision process. Switching costs, for example, were among those highlighted as a barrier for teams as many have "optimized workflows around specific model behaviors". "Changing models creates friction," he noted."

Closed models from major providers dominate use and revenue, accounting for about 80% of usage and roughly 96% of revenue. Open-source models routinely achieve 90% or more of closed-model performance while offering significantly lower prices and operational costs up to 84% lower. Developers and enterprises often choose closed options even when open models perform better and cost less due to switching costs, optimized workflows that create friction when models change, brand trust, perceived safety, and regulatory or compliance considerations that favor established providers. These dynamics limit enterprise uptake of open-source models despite potential billions in annual cost savings.

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