Imagine you are a happy (dominating) company providing two services. One, is quite a useful Product, the other one is also a product, but less visible. Customers usually buy the more visible thing, and pay for the less visible one in bundle. Of course, majority of your revenue comes from the less visible component.
And now, a competitor appears. It offers the same visible service as you do, but does it for free, and uses the open approach. More, there is no dependency to your revenue bringing component, and customers love it.
Figure 1: A faster-evolving competitor appears.
You can anticipate the competition will become more efficient than you, and customers will slowly but surely migrate to the new version, which will surely jeopardise your incomes. You do not want that.
Figure 2: The future does not look rosy.
You have a couple of options. You could f.e. open your primary solution, but that would probably open a whole new bag of worms, and, besides that, you do not believe in open in this space, there is too much money in the market waiting. You could jump ahead and offer your product as a service (if possible, marked as a green lights). But you are not interested in that, too. You want to keep your margin and avoid changes. You could also sue competition or use black PR.
Figure 3: Possible scenarios.
But there is one more play which brings very little negative backslash - Embrace&Extend. Instead of fighting with a more efficient version, you copy all the features to remove the competitive advantage. You embrace the open way of working, and once those solutions look similar, you add more features. It is an ideal play if those features utilise your money generating product, and if customers want to use them, they have to come back to you. The open version dies.
Figure 4: Embrace & Extend.
The key message is that you cannot stop Evolution, and stopping Open approach is very difficult. Often, the only option is to deliver everything what competition does (compatibility is a must) plus a few additional features, and even better if those features bind the customer to you, for good.
When Sun created Java, and it become popular, Microsoft implemented Java Virtual Machine for Windows (which could run Java). The MSFT JVM had also a couple of extensions that were Windows exclusive, so any software that used them could not run on other Operating Systems, breaking primary Java rule “Write once, run anywhere.”.
Unfortunately fro Microsoft, Sun started a legal battle which was settled, and MSFT obliged to never create a Windows-specific Java Virtual Machine.