SaaS-pocalypse chatter is doomster pr0n. It would be nice if enterprise IT were boring again
Opinion Say goodbye to the SaaS-pocalypse theory, which posits that advances in AI will bring the software-as-a-service market to its knees. Say hello to "a feedback loop with no natural brake." Or doomster porn, as others would have it.
At the beginning of this week, we woke up to a world where a single tech-related post could shake the US stock market and wipe billions of dollars off the value of favorites such as DoorDash and Uber.
According to the UK's Guardian newspaper, Citrini Research is a little-known US firm that provides insights on "transformative megatrends."
Nonetheless, the firm's blog post showed that it could have a big impact by jumping on the SaaS-pocalypse bandwagon and setting off some firecrackers.
Loosely, it imagines that the impact of LLM-based AI on the market for SaaS is such that by June 2028, US unemployment will hit 10 percent. Former Salesforce staffers will have to work as Uber drivers. Incumbent application providers will be forced to slash prices.
"SaaS wasn't 'dead,'" points out a fictional commentator from 2028 in the post. "There was still a cost-benefit analysis to running and supporting in-house builds. But in-house was an option, and that factored into pricing negotiations. Perhaps more importantly, the competitive landscape had changed. AI had made it easier to develop and ship new features, so differentiation collapsed. Incumbents were in a race to the bottom on pricing – a knife-fight with both each other and with the new crop of upstart challengers that popped up,"
More sage commentators were on hand to pour cold water on the wild speculation. Former FT journalist and Evercore ISI analyst Krishna Guha wrote: "Even if the tech and microeconomics were to evolve in line with this scenario, it is highly unlikely that the macro would, as this would require a set of extreme and improbable conditions to hold."
The CEO of cloud-based data warehouse and platform company Snowflake was also on hand to add a bit of sobriety to the SaaS-pocalypse party.
Sridhar Ramaswamy said: "It's useful to step back and look at the impact that AI as a whole is having on software. We spend a lot of time looking at this. We live this – and our take is that overall, the winners are going to be the companies that provide that single source of enterprise truth. No AI model is going to help you if there are four sources of the truth. Similarly, having built-in security, auditability, trust or even governance over access, who can access what data set is critical."
Speaking to investors, Ramaswamy's take was bound to be a bit self-serving. Snowflake wants its platform to be that single source of truth. But he has a point. It is not just the cost of building software that prevents newcomers from taking chunks out of the enterprise software market; it is inertia.
Oracle, Salesforce, and SAP have such an advantage because user data is already in these systems and users are habituated to their processes. Oracle and SAP still have a heavy on-prem footprint, but they are slowly but surely converting customers to SaaS, whether customers want to go there or not. Sure, automation will cut costs, but all the SaaS vendors are already building that automation into their stacks. Gartner says that, at least in the short to medium term, users will be happy to deploy AI agents from the application environment they already have.
It's true that SaaS-only companies may be overvalued. The growth trajectory they have enjoyed in the last decade or so will be unsustainable simply through the law of large numbers. More vendors are entering the market and on-prem vendors are converting customers to SaaS. But businesses and public sector organizations are notoriously slow-moving and risk-averse when it comes to their transactional applications. They need to have the people to make sure it works and that the data is coherent, well-governed, and mostly accurate. It might be boring, but it's true. And for now, boring might be the best way to be. ®
