As software gets more commoditized in the AI era, speculation has grown about the future of SaaS and enterprise software.
Water-cooler talk in Silicon Valley and beyond is downright blunt: Have we reached the end of SaaS, and are companies like Salesforce Inc., Workday Inc., NetSuite Inc., ServiceNow Inc. and so many others imperiled?
For the past two decades, we have lauded the SaaS business model because it is sticky and adoption friendly. Pay-per-use poses a lower barrier to entry while offering incremental improvements to minimize risk and give enterprises continuous access to the most advanced features.
Then AI arrived, and in some ways put the industry on its head. One of the byproducts of its emergence was the very survival of SaaS and all it brings.
But I would argue SaaS isn’t dead. In fact, I would go as far as to suggest the critical aforementioned SaaS and enterprise software providers have an even more important role in the tech ecosystem. Still, SaaS companies that are looking to merely embed AI features into their existing software and seek to charge incremental fees are more vulnerable than they’ve been in a long time.
Where does SaaS go from here?
To be sure, SaaS and enterprise software will remain relevant but not what it used to be.
In the future, we will have abstractions that look like what we see with OpenAI and other large language models. 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 a Monday morning and the tool will provide them with:
- A proactive dashboard of key metrics.
- A reasoning engine that provides a series of recommendations for next- best action.
- A language model grounded in a trust layer that will be able to tap data from across systems of record to answer questions in real time.
- Generative AI able to abstract the visual so you aren’t forced to open a particular app.
The possibilities are head spinning. Customer data, trends, HR insights and hiring recommendations. Supply chain risks and vulnerability. Any number of financial reports. All of it at your fingertips and at your asking.
The TLDR is this: We are transitioning to an era of consolidation and simplification. Most of our record systems have the potential to become high-value databases that are tapped by a consolidated application or abstraction layer, allowing us to generate our dashboards and actions in real time. The system will be more predictive in estimating needs and creating the types of visualizations and summaries that are most valuable for workers and business leaders.
Agentic AI and what it means
While SaaS evolves in the age of AI, Agentic AI will take on high-volume tasks and grow more efficient and accurate in its deterministic qualities. All the limitations of robotic process automation will begin to fade with the combination of agents leveraging generative models, neural networks, reinforcement learning, and other improvements.
It’s an incredibly exciting time and an inflection point.
The end of SaaS and other enterprise software hasn’t arrived, but the way in which we buy and consume software will.
Software giants Microsoft Corp., Salesforce, ServiceNow, Oracle Corp., and others will need to aggressively transform the consumption layer so businesses can extract more value from their software investments and do so in a way that aligns with the capabilities of gen AI.
It won’t be easy. Data fabric, compliance, security, and governance are difficult problems to solve. But this is an opportunity for the large installed bases of current software leaders to transform and become new and more user friendly. I truly think people will still subscribe and pay a recurring fee for a turnkey offering rather than rebuild or customize something to work for them.
SaaS isn’t dead; instead, it is changing dramatically.
Case in point: Major business model changes like what we saw from Salesforce Chief Executive Marc Benioff at Dreamforce last month in San Francisco, where it debuted Agentforce, is indicative of where it and others are headed.
Those who choose complacency and move slowly face a fast track to irrelevance.
