“Free” is coming to an end. This is not a temporary issue.

Cal.com has ceased to be open source. Cursor has raised over $200 million at a valuation of $50 billion (approximately 7.5 trillion yen).

At first glance, these two pieces of news may seem unrelated. However, they share a common root: the era of “software that was free to use” is structurally coming to an end.

For small and medium-sized enterprises (SMEs), this is not just someone else’s problem. Tools that were available for free or for a few hundred yen per month can suddenly change to “several thousand yen per month” or “enterprise plans only.” This is already happening, and it will accelerate further.

Why is this happening? And how should SMEs prepare?

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What Happened to Cal.com

Cal.com is an open-source scheduling tool that gained popularity as an alternative to Calendly. Its appeal lay in the fact that it could be self-hosted for free due to its open-source nature, making it a favorite among cost-conscious SMEs and startups.

However, Cal.com has decided to make its core code closed source.

The reason is simple: it has become difficult to generate revenue while remaining open source.

The open-source business model typically involves offering basic features for free and charging for additional enterprise features or support, known as the “open core” model. However, this model has a structural weakness. Major cloud vendors like AWS can use open-source code to provide managed services, leaving the original developers without revenue.

This issue has also occurred with ElasticSearch and MongoDB. As a result, many companies have changed their licenses to prevent cloud vendors from “riding for free.” Cal.com’s decision is an extension of this trend.

Additionally, there are unique circumstances in the AI era. As AI agents begin to automate scheduling, the value proposition of tools like Cal.com, which rely on human interaction with the UI, changes. API integrations and AI functionalities become the core differentiators. Can they win in competition while remaining open? The answer was No.

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The Significance of Cursor’s $50 Billion Valuation

Cursor is an AI-powered code editor based on VSCode, where AI assists in code completion, generation, and refactoring. Its primary offering is a $20 per month Pro plan, and its annual recurring revenue (ARR) is said to exceed $300 million.

A valuation of $50 billion significantly surpasses the $27.7 billion at which Slack was acquired. This is in a category where free was once the norm: code editors.

Why is it valued this way?

AI is dramatically changing the costs for “creators” rather than just “users.”

Many users report that using Cursor increases developer productivity by 2 to 5 times. If an engineer’s monthly salary is 600,000 yen, doubling productivity effectively frees up 300,000 yen worth of value. An investment of $20 (about 3,000 yen) yields a return of 300,000 yen per month. The ROI is 100 times.

Understanding this structure means that the argument “free VSCode is sufficient” no longer holds. Companies are willing to pay for productivity. Moreover, once accustomed to Cursor’s workflow, users find it hard to revert. Lock-in becomes effective.

Investors are flocking to this opportunity.

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Structural Reasons Why “Free” is Disappearing

When we juxtapose the stories of Cal.com and Cursor, we can see the structural forces driving the disappearance of “free tools” in the AI era. Three dynamics are at play.

1. The Operating Costs of AI Become “Deficit as Usage Increases”

In the traditional SaaS model, server costs increased only gradually as the user base grew. However, introducing AI functionalities changes the game. Each API call for LLM incurs costs. As users increase and usage intensifies, costs balloon.

Although OpenAI’s API prices have decreased, inference for GPT-4 class models can still cost several dollars to tens of dollars per million tokens. What happens if there are 10,000 free users, each calling the AI daily? The monthly API costs could reach several million to tens of millions of yen.

The traditional equation of “attracting users with a freemium model and converting them to paid” is collapsing under AI costs. Therefore, free tiers are shrinking, and the shift to paid plans is accelerating.

2. AI Becomes the Source of Differentiation, Making It Impossible to Keep Open

Cal.com’s case is emblematic. Previously, UI and UX were the differentiators. Even if they were open-sourced, they couldn’t be easily replicated.

However, in the AI era, the core of differentiation lies in model fine-tuning, prompt design, and data pipelines. These can be copied the moment the code is made public. As the nature of intellectual property to protect changes, maintaining open source becomes an irrational business decision.

3. “Sufficiently Good Free” Can Be Created Instantly with AI

Paradoxically, the evolution of AI has dramatically reduced the cost of creating “adequate tools.” With tools like Cursor, individual developers can create scheduling apps over a weekend.

In other words, the value of being “free to use” in open source is becoming diluted. If anyone can create it, differentiation shifts from “creation” to “operation, support, and reliability.” And these cannot be provided for free.

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How Should SMEs Respond?

“If free is ending, then just pay” — it’s not that simple. The issue is that the criteria for deciding which tools to pay for and which to keep in-house have changed.

Think in Terms of “Switching Costs”

When a free tool you currently use becomes paid, how much will it cost to switch? Is data export straightforward? Can API integrations be moved elsewhere?

The higher the switching costs for a tool, the greater the damage when it becomes paid. Conversely, tools that are easy to switch can continue to be used for free with lower risk.

In particular, tools that are “accumulation-based,” such as customer data, reservation data, and accounting data, require caution. You should confirm the export procedures now.

The Option to Bear “AI Costs” Yourself

Should you pay 5,000 yen per month for Cal.com’s paid plan, or should you set up an open-source alternative in-house and operate it for 1,000 yen in server costs?

In the AI era, this option of “self-operation” has become more realistic than before. With tools like Cursor reducing development costs, you can find setup procedures by asking Claude. Even SMEs can run a certain level of tools in-house without hiring engineers.

However, there are caveats. Self-operation is more challenging in terms of “keeping it running” than just “getting it running.” Security updates, bug fixes, backups — underestimating these operational costs can lead to painful consequences.

If “3,000 Yen per Month Doubles Productivity,” Then Pay

As shown by Cursor’s example, the rule of thumb is to judge based on ROI, not cost. If a tool costing 3,000 yen per month reduces an employee’s workload by 10 hours a month, that equates to a value of 15,000 yen at an hourly wage of 1,500 yen. That’s a fivefold return.

SMEs should rigorously perform this calculation. It’s not about “using it because it’s free” or “quitting because it’s paid”; it’s about determining “how much to pay and how much to get back.”

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The Real Danger is Being “Unknowingly Dependent”

Finally, one last point.

Cal.com’s transition to closed source was announced in advance. However, not all tools will follow suit. One day, a free plan may suddenly be discontinued. API specifications may change. Data export may be restricted.

The greatest risk for SMEs is not being aware of how much their operations depend on which tools.

There are three actions to take:

1. Inventory: List all the free tools currently in use.
2. Evaluate Dependency: Estimate how many hours operations would halt if each tool stopped working.
3. Secure Alternatives: Start considering alternative tools or in-house operations for those with high dependency.

In large companies, this is typically handled by the IT department. SMEs often lack such departments. Therefore, it is crucial for business owners themselves to make these judgments.

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Conclusion: The Era of Relying on “Free” is Over

The transition of Cal.com to closed source and Cursor’s $50 billion valuation both indicate the same thing.

AI is changing the value structure of software, and the economic rationale for “continuing to provide it for free” is diminishing.

This is not a cause for pessimism. Rather, it presents an opportunity for SMEs. We are in an era where the same tools used by large companies can be accessed for several thousand yen per month. What once required millions of yen for system development can now be achieved for tens of thousands of yen per month through a combination of SaaS and AI.

However, the mindset of “using it just because it’s free” is no longer viable.

What to pay for, what to keep in-house, and what to discard.

Only those SMEs that can make these judgments will survive in the AI era.