Dear CIO,
This week, we confront a hard truth that is reshaping the enterprise tech landscape: the moats we have long relied on are vanishing. In the wake of the Windsurf saga, it’s clear we have entered a new era defined by agility, not ownership. As generative AI accelerates disruption across the board, CIOs must rethink how they evaluate software investments and defend enterprise value. In this edition, we are going to discuss what this could mean for your organization.
Best Regards,
John, Your Enterprise AI Advisor
There Is No Moat
Rethinking Software Strategy
It is time to face a hard truth: there is no moat. Not around your code, not around your vendor stack, and increasingly, not even around your talent. The Windsurf saga is just the latest proof.
In case you are unaware, OpenAI was in talks to acquire the AI coding company Windsurf for $3 billion. Google stepped in last minute, but they did not buy the company. Instead, they acquired the people, meaning that Windsurf’s cofounders and key engineers were now headed to DeepMind to accelerate work on Gemini and agentic coding. And you might be wondering about Windsurf? Well, it lives on, now with a new CEO and president, a non-exclusive license deal, and zero equity exchanged with Google. No cash-out. No lock-in. No moat.
Windsurf is just the latest in a growing series of signals that point to a deeper shift in how value is created and retained in software. The traditional model of acquisition as a strategy for capability consolidation is fracturing.
Let us unpack what’s behind the breakdown:
Talent liquidity: The best technologists are not selling companies. Instead, they are selling themselves. And they are moving faster than your HR department or procurement policy.
Scale without headcount: We are seeing the rise of zero-employee startups. With models and infrastructure as leverage, teams of 5 are doing what once took 500.
Commoditized models: Whether it is open-source LLMs or licensed fine-tuned models, the technical edge is becoming a flat playing field. Your competitors can use the same base model you just paid to customize.
Diluted IP: Non-exclusive licenses, shared corpora, and pre-trained models are eroding ownership advantages.
In this world, your software vendors do not have moats. They have burn rates. And you do not have leverage. You have lock-in.
Now might not be the time to buy software. It might be time to pause, build internal learning loops, and invest in agility over architecture. The idea of a “moat” belongs to a different era. In today’s environment, it is the tide that matters. It is not about how well you can defend your position. It is how fast you can reposition, because the tide is rising.
How did we do with this edition of the AI CIO?
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