The prevailing story right now is that open source is eating the enterprise. The capability gap between the best closed and open models has shrunk to low single digits. A third of the Fortune 500 has verified accounts on Hugging Face, Chinese labs are shipping frontier-adjacent models with open weights every few weeks, and the inference providers are ripping.
Meanwhile, at Decagon, we now run ~90% of our workloads on open source models instead of OpenAI or Anthropic. This is consistent with most of the hypergrowth app companies and we’re seeing the big enterprises we work with move this direction as well.
And yet enterprise spend as a whole is moving the opposite direction. Open source models just fell to 11% of enterprise LLM spend, down from 19% a year ago.
The trend is actually moving the other way compared to the popular narrative. Why is this and what does it mean for the future?
First, some context on why we're 90% open source. It wasn't cost, and it wasn't because our customers demanded it (though they don't mind it). It was because we had no other option.
When you're running AI agents in production for customer service, latency makes or breaks the product. A conversation where every turn takes 8 seconds is not a product anyone will use. So you need small, fast models. Each model call does not need to know the capital of Lithuania or high school physics.
But small models out of the box aren't good enough for the quality bar our customers hold us to. They only get there through heavy fine-tuning on the exact task. The frontier labs don't really sell this combination. You can't fine-tune their best models the way we need to, and their small models aren't ours to shape. Small + fine-tuned means open weights. The cost savings are real but secondary, and enterprise comfort with self-hosted models is a nice side effect, not the reason.
So why is a company like ours 90% open source while the broader enterprise number is going down?
The answer is use case maturity. When a use case is new, you want the smartest general-purpose model you can get. You don't know the shape of the problem yet, so you pay a premium for intelligence you may not end up needing. That's the right trade at that stage. But once the use case is fully built out, when you know the distribution of inputs, the behaviors you need, and the failure modes to guard against, the trade flips. Now general intelligence is overhead, and you want the smallest, fastest model fine-tuned to do your specific thing extremely well.
Customer service happens to be one of the most obvious AI use cases in the industry. Well-understood workflows, enormous conversation volume, tight quality bars. Which means companies like us are simply further along the curve than the average enterprise deployment.
And that's the resolution to the paradox. The reason open source share fell isn't that open source is losing. It's that enterprise AI as a whole is at the very beginning of the maturity curve. Last year enterprises stopped building and started buying, and thousands of brand new use cases spun up at once. New use cases run on frontier models, so closed share exploded. The 11% is a denominator problem: the pool of immature use cases is growing faster than the pool of mature ones.
If that's right, then every use case being prototyped on a frontier model today is a future open source migration. As deployments mature, companies will do what we did: distill, fine-tune, specialize. The frontier labs will keep owning discovery. Open source will increasingly own production.
However, this will take longer than people think. Most use cases are just not at the point where the “shape” of the agent is finalized such that it makes sense to start fine-tuning open source models.
Fine-tuning takes effort, and most organizations don’t have the resources or expertise to do it. The use case would have to be very high ROI and already fully deployed at scale for it to be worth it. You also need enough data to make sure the smaller models can perform at the same level as the frontier ones at a given task.
Otherwise, it’s just way easier to plug in one of the frontier closed-source models. You don’t have to worry about owning any of the infrastructure and you get the freedom to iterate and experiment freely.
Therefore, the share of LLM spend on open source will eventually inflect up but it won’t happen for many years.
