Earlier quoted context omitted.
That helps to prevent his software from becoming a cash cow, as it encourages constant innovation on his part to stay ahead of the open-source competition. But until the open source replacement is as good, he'll still be able to earn money by licensing it.
The question would be whether open-sourcing now might lead to higher profits over the long term than remaining closed-source until some later date. In the case you suggest, it could be that once the open source replacement is as good --- or nearly as good -- the closed-source business simply shrivels up and dies. By switching now, before open source has caught up, the currently closed-source company could attract use…
The term open-source is ambiguous. It's possible to release the source and still charge for the software and have restrictions on its use or distribution, e.g. by having a shared-source licence.
Use of shared-source would mean anyone intending to release their version of the software on a different licence would not only have to rewrite the code from scratch but, to avoid suspicions of plagiarism, take great care that their code bears no resemblance to the source code, which they have already been given.
Finally, I've already pointed out that requiring payment for commercial also buys the developer time, and encourages them to improve the software or develop entirely new software.