When people say ”AI is Killing SaaS”, that does not have to mean ”Claude Code can one-shot your full stack“. More likely it means: AI code is going to distort the supply curve such that

1) previously healthy surplus in the SaaS market is shrinking

2) established SaaS companies have lost all existing moats

3) due to the previous two points, investors are reluctant to spend new dollars in this market to expand or retain market share, making life in those companies miserable.

> But the path forward is brutal

And soon™ this is coming to your industry as well!

Honest answers won't cut anything here. Structural dependencies of the current age SoR vendors will have a serious threat of survival. Vibe-coding tools, practices will not overnight solve or compress the humongous structures built over years.

Their only options are to acquire and gobble up as competition shows up or delay by some form of obstruction to current clients leaving them.

One-off SaaS tools will probably see the quickest consolidation, either because the big SoR vendors can build them too with AI tools and offering some reduction in in IT complexities (like vendor mgmt, renewal headaches, integrations, security postures).

New age companies with SoR capabilities being built or having unique and differentiated capabilities will challenge the current SoR players.

It is not something to happen overnight. Enterprises will not roll over by finding new tools. They will look for the next best opportunity during renewal of current ones. they will demand better prices or price reductions and give some more life to current age SoRs (businesses have to run; sales & CIO relationships are not purely technical merits as well). Their change mgmt itself is time taking and complex projects and processes. Risk (of change) mgmt is usually well baked into their processes. Data lock-in is some time protection for them.

SMBs will adopt fast, offer opportunities to new age SoRs.

> Our products work, but are not loved. Enterprise sales runs the show.

Don't blame AI for this correction, then.

> All of them are coming for our SaaS margins, and as an industry we are woefully unprepared.

My company just switched from slug slow product management driven tech to startup footing. Everything is up for grabs everywhere. And it's always like this in tech when there's a sea change.

> We also struggle to attract this kind of talent. People who fit that profile go to FAANG or the labs.

Hires aren't the problem, culture is. I can take the same new dev that a FAANG hires and turn them into a slug with the development process I see at most b2b saas companies. The flipside is true too: you can take an average dev and set them free and amazing things happen.

Most B2B SaaS companies have three people managing tickets for every developer, executives don't understand bugs are the byproduct of progress (and will be fixed quickly), have name brand enterprise agile-fall style processes, have six months of sprints preplanned, are fixated on UI testing, and do releases like they are publishing CD ROMS. This kind of culture is literally repugnant to innovators, problem solvers, people doing things a new way, and people who value doing things well (because fighting everyone to change for better sucks).

Disruption is only joyful when it’s not you being disrupted.

But it is the way of things.

No one will migrate away in a huge hurry, you’ve got plenty of time to make your plan.

Was this post by an Anthropic/OpenAI insider?

Kinda smells like viral marketing.

Is SoR as you described it a Venn diagram of enterprise resource applications such as sap, peoplesoft, etc - or a different beast entirely?

ERP world is legacy beyond belief and the technology is neither amazing nor fast as you mention. The trick here is the profound awareness of business processes. I'm a techie in ERP world and deeply aware the business transformation team are the important ones (on implementation... Sales, otherwise,of course :/). The business rules for what we as techies think is simple (payroll, taxes, accounting - how complicated can it be??) are mind blowingly complex yet often poorly documented. I honestly don't know yet if today's LLM can grok them both deeply and safely / consistently enough

> But the path forward is brutal

Great insider feedback. What is the switching cost for a SoR ? Is it embedded so deeply that is impossible to switch (like IBM mainframes). Wont the incumbents make a good living increasing per-seat prices each year to their required growth rates, and their customers have no option but to pay-up.

The thesis makes sense. I agree AI coding will enable increasing disruption and competitive threats in large enterprise SaaS. For being in tech, it's a category which has been relatively free of major disruption for a while and is probably overdue for some 'excitement' (in the Chinese proverb sense).

Another factor is customer expectations, which can have a way of turning into self-fulfilling prophecies. All the hype around AI in software creates a sense of overall change in the air, making large enterprise managers question if they need to do anything about it. And just by increasing how often that question is asked, orgs will end up changing more things faster than before.

Most software is just middlemen collecting money. Thats the reason why there is no economic drastic growth even with 2-3 years of AI.

What you’re worrying about is just bigger middlemen.

If you were not a value extracting middleman there would be no fear of replacement, because you can always create more than what you take.

I’m glad if this causes a shift in the industry and we lose x analysts, x architects, x scientists, data engineers and all other formulaic middlemen that just live in a weird middlemen economy.

It is immense luck that we don’t have to actually produce something and we get paid but it is much better if we’re forced to actually do something that isn’t empty.

You are under-estimating the power of AI tools to dynamically adapt to business needs and fully supplant all SaaS, even SoR vendors. The ERP database (e.g.) is safe. The rest of the app is on the table. It will happen faster than you think.

I’m in the same boat. AI can gen better UI forms, and a database is a database is a database. Customers want MCP and API access to do their own thing on their own terms. Model co’s and folks like Palantir come in to “partner” but the writing is on the wall.

So what are we going to do about it? Genuinely up for a startup here.

How do you think big labs will try to attack you guys? Why not just close the data to them?

SAAS was always dubious anyway, for every SAAS a companies team implements you end up with an "integration engineer" to bring the data back into a "data lake" from the "data silo" buying the SAAS caused - and then you just wonder "why didn't we just build this"? Then AI I made completing "20% happy path" so easy you ask "really why didn't we just build this - what's 2k more lines in our monolith between existing engineers"?

Used to take a few days, 90% was never that hard, now it takes half a day or so.

I'm a top executive at a system of record SaaS company. I fail to understand the argumentation this post is trying to make. Language is too vague, problem description too general. Too many abbreviations.

>As a huge enterprise, you’re not going to rip out a component your SoR for a cool startup or a vibe-coded internal tool

If you are a huge enterprise, why not?

SaaS is very much not my area of expertise, but this makes sense to me: https://x.com/DavidOndrej1/status/2019126831761572169

TLDR excerpt: - Top layer — the AI agent. The thing that actually executes the work. - Middle layer — the SaaS UI. The dashboards, the workflows, the buttons you click. - Bottom layer — systems of record. The databases, CRMs, and ERPs that store the real data.

Right now, value is getting sucked upward into the agent layer and downward into the data layer. Everything in the thin middle gets crushed.

Open-source was already coming for all SaaS. Look at apps like Cal.com compared to Calendly and you’ll see it’s light years ahead and you can self-host with 1 click. Look at Twenty, a CRM, and it’s so much less bloated then Salesforce. These are 2 examples of hundreds if not thousands and LLMs are trained on this open-source code already.

I’ve been following open-source alternatives long before AI and the biggest drawback was bad UI design, but AI makes that easier and now even more open-source alternatives are launching.

The incentives made this the obvious next step. SaaS are not something that continuously needs to made better, but them being publicly traded means they have to. So what do they do? They add more features that most customers don’t need, they put essential features behind a bigger paywall, they enshittify by adding ads or selling your data. As these SaaSes added more features and the configuration to boot, people were already learning to “program” but within their walled gardens. If you’re already learning how to configure these applications, how big of a step is no-code and now asking a terminal agent to build that one functionality you need?

Before AI became big, you could already see YC funding open-source alternatives to popular applications since they also saw this coming. Notice how they’ve slowed that down now because they know it will lead to their own demise.

> We're cooked

How I know this was written by a marketing person. Stop grifting, please.

This was written by Sam Altman.