Will AI kill the SaaS star?
Whether SaaS lives or dies in the age of AI doesn’t depend on technology – it depends on the value it delivers.
At its core – and this is a point I’ve seen stated very clearly lately – SaaS companies do something fairly simple: they make data accessible. Through an app or a website, from anywhere, at any time, across multiple users. That was, and still is, a powerful value proposition – especially when building such systems used to take months.
Then AI arrived.
Today, writing code is easy – almost casual. Applications that once required teams and long development cycles can now be spun up in minutes. On the surface, this looks like a death blow to SaaS. But the reality is more nuanced.
Because the real question isn’t can you build it?
It’s should be: will you maintain it?
Every codebase has a cost: time, attention, maintenance. Sometimes that cost exceeds the value it creates.
To understand where SaaS survives, we need to look at two dimensions: the source of added value and the customer’s cost model, i.e, the SaaS revenue model
Value can come from simple data management (personal tasks), a “small” network effect (team collaboration), or a truly large one – media and information platforms like Netflix, YouTube, or Google. On top of that sit layers of features, more or less customized.
The cost model is familiar: a free tier, with limited usability and/ or ads, or tiered subscriptions – usually aligned with feature depth.
The combination of these two is what locks customers in over time. In the past, that is until now, companies paid (paying) almost as much as internal development because it was cheaper than dealing with the complexity. Today, internal development costs have dropped dramatically. And when the network effect is small – a handful of teammates, for the sake of discussion, the lock-in disappears.
If a service is too cheap, there’s no incentive to build it yourself.
If it’s too expensive, AI will do the job.
Instead of internal development (today’s buzz), we’ll see companies offering Salesforce-level services at a fraction of the price. If that fraction creeps up, another company will replace them.
In other words, the SaaS moat is eroding. SaaS is moving closer to a commodity – but it’s not disappearing.
The big winners will be SaaS companies that reinvent themselves.
The first to get hurt? Those that keep operating under the “umbrella model” – opening it just a bit more each time: another module, another upsell, another fee.
In the age of AI, that’s no longer enough.
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