Thoughts on AI and SaaS
Of late the stock prices of SaaS companies are battered. People think enterprises will use AI to engineer their own CRM or ERP and ditch their existing solutions.
My perspective: possible for companies to build their own, but not feasible or worthwhile doing. Building software is one thing. Operating it securely, another.
The boom in cloud computing has those lessons. People moved to cloud not because they couldn't run their own infrastructure, but because they wanted to focus on running their business and not have the headache of running the infrastructure. So now the idea that companies will take on building their application layer? Unlikely.
Open source tells the same story. Fantastic enterprise software has been available for free for years. There you didn't even have to prompt to build. But enterprises needed reliability, accountability and assurance.
There is no cost advantage either. Building a scalable, highly available application costs the same or probably more than buying a SaaS subscription.
Sure, small custom internal apps and custom dashboards, where availability and resilience are not much of a requirement, companies might be able to cook up something and replace. But I don't think it's happening at an enterprise scale.
What I think actually happens
More vertical, highly specialised SaaS gets built. Motivated individuals and very small teams will be able to build sophisticated solutions. A $100 AI subscription enables that, because you get an expert in everything for that price. Use them judiciously, apply domain knowledge, and you can build a superb, highly specialised vertical SaaS product. It is something I am very focused on doing by building trackbooks.in.
For incumbent SaaS providers, it's likely to mean a lot more competition, therefore undercutting of their prices, and therefore adjustments to their valuations. And that will reflect in their stock prices.
Some SaaS might lose relevance altogether, because the underlying business processes they support are themselves changing. Think about project management tools like Jira, built around software development that used to take months and years, where traceability and documentation were key requirements. But if AI produces code in minutes, do you really need that level of traceability? Or shallow CRM tools: if I can get AI to orchestrate those workflows, do I need a sophisticated tool sitting in between?
That loss of relevance creates new opportunities. What kind of app do I need to track and manage AI-built software? Can we use AI to simplify workflows which were untouched before because the cost of building software for them was too high?
Likewise, small enterprises which operated using emails, Excel sheets and Word documents: can we create custom, sophisticated software for them? That is where the value will be, and the opportunities to create meaningful businesses.
More software also means more hosting. Given that making software got easier, there will be a lot more software out there, and the need to host it will further explode. This presents an opportunity for infrastructure specialists who can help host these mini apps.
So no, SaaS isn't dying. It's about to get a lot more competitive, a lot more specialised, and a lot more interesting.