Does An AI Future Have Room for Saas?
Have we reached the end of SaaS? Are companies like Salesforce, Workday, Netsuite, Monday, ServiceNow and so many other facing a certain end or perhaps an uncertain future?
We have lauded the SaaS business model for the past two or so decades. The model has been sticky and adoption friendly. Pay-per-use with a lower barrier to entry and a continuous drip of incremental improvement to mitigate risk and enable enterprises to continuously have access to the most advanced features.
Then AI arrived. And it has turned the industry in some ways on its head.
But I would argue that SaaS in entirety isn't dead. In fact, I would go as far as to suggest that the most critical SaaS and Enterprise Software providers like some of those that I named above have an even more important role to play. But those SaaS companies that are just looking at embedding some AI features into their existing software and seek to charge a bunch of incremental fees to give access to AI are more vulnerable than they've been in a long time.
So where does it go from here?
The way I see it is SaaS and Enterprise Software will remain of relevance, but it won't be at all the way we have used it to date.
In the future, we will have abstractions that look like what we are seeing with OpenAI and other LLMs. We will have tools that can use multi-modal interfaces to ask and answer questions. To go seek out information and like we are seeing with the newest reasoning models, these tools will be able to help us reason.
A CEO will be able to wake up on Monday morning and the tool will provide it:
- A proactive dashboard of key metrics.
- The reasoning engine will provide as series of recommendations for next best action
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- The language model will be grounded in a trust layer and will be able to tap data from across systems of record to answer questions in real time.
- Generative AI will be able to abstract the visual so you don't have to open a particular App.
Think customer data, trends, HR insights and hiring recommendations, Supply chain risks and vulnerability, and any number of financial reports. Right at your fingertips. Just ask it.
The TLDR is that we are going to move to an era of consolidation and simplification. Most of our systems of records have the potential to become high-value databases that are tapped by a consolidated application or abstraction layer. We will generate our dashboards and actions in real time. The system will be more predictive in estimating our needs and creating the types of visualizations and summaries that are most valuable for workers and business leaders.
Agentic AI will take on the high-volume tasks and will continue to get more efficient and accurate in its deterministic qualities. All the limitations of RPA will begin to be removed with the combination of Agents leveraging generative models, neural network, reinforcement learning, and other continuous improvement capabilities.
It's an incredibly exciting time. But there is no doubt we are at an inflection.
The end of SaaS and other Enterprise Software hasn't arrived yet. But the way we are used to buying and consuming software will change dramatically.
I believe software companies like Microsoft, Salesforce, ServiceNow, Oracle, and others will need to be aggressive in transforming the consumption layer to enable businesses to extract more value from software investments and do so in a way that is modern and matches the capabilities we are seeing with generative AI.
But and this is a big but. The data fabric, compliance, security, and governance are difficult problems to solve, and this is an opportunity for the large installed bases of current software leaders to transform and become something new and more user friendly. And I think people will still subscribe and pay a recurring fee for a turnkey offering rather than having to try and build or customize something to work for them.
SaaS isn't dead, but it won't be the same for long. Major business model changes like what we saw from Marc Benioff at Dreamforce is indicative of where it is heading. Complacency will kill slow movers here. But it isn't just going away. At least not yet.
Corporate Vice President & General Manager, Network, Edge and AI Group
2moDaniel Newman well said, What do you think about Klarna's latest announcement on replacing traditional Enterprise SW and rewriting with in house AI driven solutions? One off example or a rising trend?
✅ Développeur Web FullStack | Laravel | Vuejs
2moenterprise software leaders must adapt to ai's disruptive potential.
Analyst Relations Manager at Ericsson Enterprise Wireless Solutions | Wearer of Many Hats | Former Educator Turned Analyst Relations Professional
2moDaniel Newman curious about your thoughts on this passage, specifically the section about monetization; "But those SaaS companies that are just looking at embedding some AI features into their existing software and seek to charge a bunch of incremental fees to give access to AI are more vulnerable than they've been in a long time." Is your opinion that SaaS companies shouldn't be looking at AI as a feature add-on, but rather a central piece of the offering that comes with the core license?