Industry Refragmentation

Industries consolidate when the barriers to entry are high: when the capital required to assemble a competitive team exceeds the resources available to most entrants, when scale economies favor incumbents, when distribution networks are difficult to build. The software industry consolidated substantially before 2025 for exactly these reasons: assembling the engineering teams required for competitive products created genuine entry barriers, and scale economies in recruiting, infrastructure, and distribution reinforced the advantages of incumbents. Large language models are dismantling this structure. The cost of assembling an engineering team has fallen by an order of magnitude. The minimum efficient scale for competitive software development has shrunk from dozens of people to a handful, or one. Porter's five forces framework identifies the structural consequence: when entry barriers fall, industry structure refragments. But the refragmented landscape that AI produces is unlike the original fragmented landscape from which the industry consolidated, because the individual producers in the new