By the way, thank you so much for posting both the origina post and the rebuttal. I had the same experience as you. I agree with guy 1. And I agree with guy 2. Confused.
But FWIW I don't think it's impossible to largely agree with both. On some of the details, yes, they're in opposition (e.g., how much of FactSet's value prop was search), but broadly
Yes, a lot of things got easier to build
But I still think people want to buy apps built by people with domain expertise who package them.
Think: we're a bunch of marketing demandgen experts and we're going to use these amazing power tools to build something you really need. That's what I think is going to happen.
It always comes down to two things imho
1. Who wins as the standard underlying platform (e.g., OS, DBMS, now SaaS SoRs, foundation models)
2. Who can capture expertise (horizontal/functional (e.g., HR) or vertical) best and sell it to a buyer to improve their work life.
I am also cautious that the people who believe we all want an IKEA software future do not realize there are a lot of us who prefer to spend our time/gifts elsewhere and are content with a COTS paradigm.
I do believe things are different in the future, and that we should be willing to re-think most of what we know, but making sure we keep coming back to the real problems we are interested in solving, vs. just what looks easy when you have never done it before.
A thoughtful and honest take. We explored the SaaSpocalypse on a recent episode of The Metrics Brothers, but we didn't land hard on one side or the other. My primary points: the stock market is not the economy (i.e., the stock market is not the business). SaaS stocks that are getting hammered while doing beat-and-raise and growing 20% (e.g., $NOW). This is not, yet at least, the businesses falling apart. This is the stock market thinking the party might be over and realizing well that 15x revenue is perhaps a bit steep for a SaaS stock to begin with.
AI will take jobs, the question is does every CEO cut half their company overnight, crash the economy, and cause massive strife and disruption. I know there's a tragedy of the commons angle here, but hopefully they're smarter and more conservative than that.
Some of the jobs won't be missed. Some will be pushed up into higher value-add. New jobs will get created. The question is simply how fast all this goes down and too fast is definitely a big risk and possibility.
On the dark side, we could see 1960s-level social unrest combined with 1930s-era unemployment. What fun.
I think we are on the same page on SaaS. My current take is that other factors in the global economy are a much bigger impact on jobs than AI. Blaming AI is an easy call.
Great article. I'll start by sharing that I grew up reading Bertie Wooster too. Not nearly as much as you, but enough to appreciate his clever sense of humor.
I cannot speak to other SaaS verticals, but when it comes to HR platforms I think the natural preference of companies is to do nothing unless there is a very compelling reason to change. They aren't going to change from SaaS just because someone provides the same features using AI. From the perspective of non-HR leaders, a company's core HR platform is like the plumbing of their house. They know its important, don't really understand how it works, only think about it when it screws up, feel it costs way to much to fix than it should, and view a good day as one where they don't have to think about it at all.
That said, I can imagine three things that could drive companies to migrate from legacy SaaS Systems to new AI native platforms.
1. Cost Savings. A new AI native core HR platform is developed that does most of what the legacy SaaS systems do at a fraction of the cost. If the cost saving are great enough, finance is likely to pressure HR to move even if they don't want to. People seem to have forgot that total cost of ownership was one of the drivers that led companies to leave on-prem systems for cloud systems.
2. Transformational impact. Someone develops a new AI based system that fundamentally changes a company's ability to optimize the costs and maximize the value of its workforce. For example, building a system that links employee attributes to financial outcomes so organizations are able to calculate the ROI of compensation applied to specific jobs, skills, or people. Imagine a system where companies could accurately estimate the cost of NOT employing someone (e.g. calculating the impact that loss of a person has on organizational revenue and profitability). This sort of capability, or something similarly transformational, could provide enough of a differentiator from existing SaaS systems to get business leaders to support a change.
3. Feature creep. A company starts by building specialized AI solutions that run alongside existing SaaS systems supporting things such as workforce planning, talent mobility, development, etc. Then it steadily adds on more and more features until it pushes out the legacy SaaS system. This will only work if the company can resist being acquired by one of these legacy SaaS providers, given how many of the current HR tech investment strategies are focused on exit through acquisition vs exit through IPO. It seems like no-one takes companies public any more. It's kind of sad.
Curious what you think of this take? But for now I'll close with another quote by Wodehouse that seems appropriate to the topic of whether new AI native solutions will replace established SaaS platforms: "It was one of those cases where you approve the broad, general principle of an idea but can't help being in a bit of a twitter at the prospect of putting it into practical effect. I explained this to Jeeves, and he said much the same thing had bothered Hamlet.”
And just because I can't resist, here's a parody of Shakespeare to bring it full circle to the quote in your article.
"To re-platform or not to re-platorm, that is the question:
Whether 'tis nobler in the mind to suffer
The fees and service charges of outrageous SaaS systems,
Or to take up AI against a sea of legacy vendors
And by opposing end them. And by end them to say we end
The heart-ache of one platform only to endure a new array of a thousand natural shocks
Thanks for the blog but even more for the tip re. the Jeeves & Wooster series with the fabulously cynical Laurie and ridiculously funny Fry. Didn't know it and bought it right away on eBay. PS: if you haven't done so yet (but I assume you have), then read PG.Wodehouse's The Golf Omnibus (particularly 11 - The coming of gowf: hilarious!).
By the way, thank you so much for posting both the origina post and the rebuttal. I had the same experience as you. I agree with guy 1. And I agree with guy 2. Confused.
But FWIW I don't think it's impossible to largely agree with both. On some of the details, yes, they're in opposition (e.g., how much of FactSet's value prop was search), but broadly
Yes, a lot of things got easier to build
But I still think people want to buy apps built by people with domain expertise who package them.
Think: we're a bunch of marketing demandgen experts and we're going to use these amazing power tools to build something you really need. That's what I think is going to happen.
It always comes down to two things imho
1. Who wins as the standard underlying platform (e.g., OS, DBMS, now SaaS SoRs, foundation models)
2. Who can capture expertise (horizontal/functional (e.g., HR) or vertical) best and sell it to a buyer to improve their work life.
I am also cautious that the people who believe we all want an IKEA software future do not realize there are a lot of us who prefer to spend our time/gifts elsewhere and are content with a COTS paradigm.
I did love that someone put this in the response thread - having lived multiple "re-platform" lifetimes I believe that while there are sometimes reasons to start over the costs are always higher than people realize. https://www.joelonsoftware.com/2000/04/06/things-you-should-never-do-part-i/.
I do believe things are different in the future, and that we should be willing to re-think most of what we know, but making sure we keep coming back to the real problems we are interested in solving, vs. just what looks easy when you have never done it before.
A thoughtful and honest take. We explored the SaaSpocalypse on a recent episode of The Metrics Brothers, but we didn't land hard on one side or the other. My primary points: the stock market is not the economy (i.e., the stock market is not the business). SaaS stocks that are getting hammered while doing beat-and-raise and growing 20% (e.g., $NOW). This is not, yet at least, the businesses falling apart. This is the stock market thinking the party might be over and realizing well that 15x revenue is perhaps a bit steep for a SaaS stock to begin with.
AI will take jobs, the question is does every CEO cut half their company overnight, crash the economy, and cause massive strife and disruption. I know there's a tragedy of the commons angle here, but hopefully they're smarter and more conservative than that.
Some of the jobs won't be missed. Some will be pushed up into higher value-add. New jobs will get created. The question is simply how fast all this goes down and too fast is definitely a big risk and possibility.
On the dark side, we could see 1960s-level social unrest combined with 1930s-era unemployment. What fun.
I think we are on the same page on SaaS. My current take is that other factors in the global economy are a much bigger impact on jobs than AI. Blaming AI is an easy call.
100% on the side of the jobs impact (so far?) is tied to the broader macros and AI is the PR cover story.
Great article. I'll start by sharing that I grew up reading Bertie Wooster too. Not nearly as much as you, but enough to appreciate his clever sense of humor.
I cannot speak to other SaaS verticals, but when it comes to HR platforms I think the natural preference of companies is to do nothing unless there is a very compelling reason to change. They aren't going to change from SaaS just because someone provides the same features using AI. From the perspective of non-HR leaders, a company's core HR platform is like the plumbing of their house. They know its important, don't really understand how it works, only think about it when it screws up, feel it costs way to much to fix than it should, and view a good day as one where they don't have to think about it at all.
That said, I can imagine three things that could drive companies to migrate from legacy SaaS Systems to new AI native platforms.
1. Cost Savings. A new AI native core HR platform is developed that does most of what the legacy SaaS systems do at a fraction of the cost. If the cost saving are great enough, finance is likely to pressure HR to move even if they don't want to. People seem to have forgot that total cost of ownership was one of the drivers that led companies to leave on-prem systems for cloud systems.
2. Transformational impact. Someone develops a new AI based system that fundamentally changes a company's ability to optimize the costs and maximize the value of its workforce. For example, building a system that links employee attributes to financial outcomes so organizations are able to calculate the ROI of compensation applied to specific jobs, skills, or people. Imagine a system where companies could accurately estimate the cost of NOT employing someone (e.g. calculating the impact that loss of a person has on organizational revenue and profitability). This sort of capability, or something similarly transformational, could provide enough of a differentiator from existing SaaS systems to get business leaders to support a change.
3. Feature creep. A company starts by building specialized AI solutions that run alongside existing SaaS systems supporting things such as workforce planning, talent mobility, development, etc. Then it steadily adds on more and more features until it pushes out the legacy SaaS system. This will only work if the company can resist being acquired by one of these legacy SaaS providers, given how many of the current HR tech investment strategies are focused on exit through acquisition vs exit through IPO. It seems like no-one takes companies public any more. It's kind of sad.
Curious what you think of this take? But for now I'll close with another quote by Wodehouse that seems appropriate to the topic of whether new AI native solutions will replace established SaaS platforms: "It was one of those cases where you approve the broad, general principle of an idea but can't help being in a bit of a twitter at the prospect of putting it into practical effect. I explained this to Jeeves, and he said much the same thing had bothered Hamlet.”
And just because I can't resist, here's a parody of Shakespeare to bring it full circle to the quote in your article.
"To re-platform or not to re-platorm, that is the question:
Whether 'tis nobler in the mind to suffer
The fees and service charges of outrageous SaaS systems,
Or to take up AI against a sea of legacy vendors
And by opposing end them. And by end them to say we end
The heart-ache of one platform only to endure a new array of a thousand natural shocks
That all technology systems are heir to"
Thanks for the blog but even more for the tip re. the Jeeves & Wooster series with the fabulously cynical Laurie and ridiculously funny Fry. Didn't know it and bought it right away on eBay. PS: if you haven't done so yet (but I assume you have), then read PG.Wodehouse's The Golf Omnibus (particularly 11 - The coming of gowf: hilarious!).
He missed short putts because of the uproar of the butterflies in the adjoining meadows.
Very inspiring thoughts, Thomas. Actually it made me think, if there could be something like a "SaaS Vulnerability Map". So here are my thoughts: https://www.linkedin.com/pulse/ai-kills-saas-sebastian-dettmers-from-stepstone-florian-gero-hesse-fdi9f/