Charles HudsonFounder and Managing Partner, Precursor Ventures

Is software's golden age of high margins ending?

8 Sept 2025 · 1 min

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Charles Hudson argues that software is shifting toward an open-source-like economic model where most economic value accrues to the implementer rather than the original author. He predicts rapid deflation in software prices (e.g., a $10,000 product in three years equating to a former $1,000,000 product), which will compress vendor margins but increase consumer surplus — a change he views as socially positive.

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If you think about the total opposite end of the spectrum is open source, where the economic value mostly goes to the person implementing the software, not the person who wrote it. The person who wrote it usually writes it for other reasons. I think the software business is going to look more like open Source, where a $10,000 piece of software in three years is going to probably be the equivalent of a million dollar piece of software five years ago. It's just deflationary. You're going to pay a lot less, which to me means margins will go down because the consumer of software is going to capture much more of the value and that's good for society.