A lot of these companies are not small monthly fees. And if you’ve ever worked with them, you’ll know that many of the tools they sell are an exact match for almost nobody’s needs.

So what happens is a corporation ends up spending a lot of money for a square tool that they have to hammer into a circle hole. They do it because the alternative is worse.

AI coding does not allow you to build anything even mildly complex with no programmers yet. But it does reduced by an order of magnitude the amount of money you need to spend on programming a solution that would work better.

Another thing AI enables is significantly lower switching costs. A friend of mine owned an in person and online retailer that was early to the game, having come online in the late 90s. I remember asking him, sometime around 2010, when his Store had become very difficult to use, why he didn’t switch to a more modern selling platform, and the answer was that it would have taken him years to get his inventory moved from one system to another. Modern AI probably could’ve done almost all of the work for him.

I can’t even imagine what would happen if somebody like Ford wanted to get off of their SAP or Oracle solution. A lot of these products don’t withhold access to your data but they also won’t provide it to you in any format that could be used without a ton of work that until recently would’ve required a large number of man hours

Hmm, I wonder if it would be cheaper to hire a couple of software engineers to vibe-code custom SaaS apps on top of the company's existing data layer instead of paying for a hundred different SaaS subscriptions.

Financial considerations aside, one advantage of having in-house engineers is that you can get custom features built on-demand without having to be blocked on the roadmap of a SaaS company juggling feature requests from multiple customers...

If AI can code, why do you think it cannot handle building, testing, debugging, securing, monitoring, supporting, incident handling, and so on?

Consider incident handling. What if your AI sets up monitoring that detects errors or outages, wakes up an agent, gives it the problem context, then sets it to work so it can debug the issue, produce a fix, then deploy it? You now have an end-to-end system that works 24/7. Many issues will probably be resolved before you've even noticed them.

If your response is, AIs won't ever be smart or capable enough to do this as well as humans, how has that same prediction worked out for coding?

The next generation of AI "coding" tools will essentially be SaaS companies in a box. Agents will code the app, but they'll also test it, debug it, support it, etc. And this will happen in months, not years.

Atlassian tools for a client like mine (hundreds of employees) can easily cover the expense of internalizing it. It's Jira plus confluence mostly, it's not rocket science.

And that's just atlassian.

Start adding stuff that costs many many many yearly salaries (special software for managing inventories and warehouses) it starts making sense to prototype alternatives internally.

I came to the conclusion that if it's not Teams/SharePoint or the moat is on the extreme legal complexity side (e.g. payrolls), you can at least think of building an alternative that is good enough without needing to be perfect.

"Small Monthly Fee" is a very loaded term here. Im in the negotiations for these platforms, the price that many of these companies command for their products will very often pay the salaries of a whole software department. Add to this the quality of support being the lowest possible option above "nonexistant" and I would say the risk to these SaaS companies is real.

The real benefit of these types of SaaS offerings was their ubiquity across multiple industries and verticals. If a company bought Salesforce, they could very readily find employees that would be able to quickly onboard since they would likley have used it at previous companies. AI software generation is changing this as more and more software being created is bespoke and increasingly one-of-a-kind with these tools allowing companies to create software that fits their unique and specific needs.

My hot take here is that the moats previously enjoyed by SaaS companies will increasingly vanish as smaller and smaller teams can assemble "good enough" solutions that companies will adopt instead of paying giant chunks of their budget on pre-built SaaS tools that will increasingly demand more training to Onboard.

Other reason could be that investors think companies are going to lay off a lot of their staff and then that will decrease Saas revenue anyway.

Hyper custom software can allow your business flows to sync together a lot better than the alternative, using zapier to glue a bunch of mostly poor fits and ending up with Frankenstein processes.

Also, it allows you to pick and choose what you want from where.

We’ve just completed the first month of our internal CRM that has replaced about 500$ a month in subs with something that flows much better and enforces our own internal processes.

yes, but this does fit into the head of MBA-bobo-management stylers, who believe ChatGPT will replace everyone :)

Yes, it's just that some companies will fail to adapt, but there will be new jobs.

That would justify a good multiple of 5 to 10. Not 30 or above as for high growth companies.

Lol. ServiceNow, Oracle, Workday, etc are not small monthly fees. That's what the market is shitting on. (Oracle is different, given the corruption and OpenAI grift angle.)

My buddy works for a company like these. He landed a $5M contract last year, which netted him almost $800k. There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack those margins.

AI-based startups like Vanta make it much easier for companies to meet the compliance bullshit the large companies require. Again, it will drive more competition == better values for customers.

yes but investors don't know that

or for a more charitable comment, I think the issue people struggle with right now is how much of non-AI software will be replaced by AI-native versions. and it's not even a 1:1 mapping. we may see 5 different small companies replaced by a single AI interface. all TBD, but there's merit to avoiding that risk right now if you can just allocate to NVDA and GOOG instead

> AI-generated code

AI "generated" code requires a large base of training data to draw from. If we all stop writing code then there will no new code written. Just rehashes of stolen ideas. There is no long tail to this industry or ideal.

> That's very expensive.

As long as you convince someone else to pay the bill who cares? The real problem is are you losing your competitive edge? If everyone else can crank out the same stolen crap you can then there is no reason for you to even exist.

Foundational software requires that, but the foundation is pretty much completely built at this point. The workforce required to keep it running is but a tiny fraction of what was required to build it. The past has shown that innovation in hardware can push for the foundations to be rebuilt, but we've also already got computers basically everywhere now. There may not be some new innovation that requires the foundations to be completely rewritten again.

The little one-off programs that we thought would keep developers busy forevermore don't require engineers. They often don't even require code. LLMs can natively do a lot of things that historically would have required software.

AI-generated code is not copyrightable and therefore cannot be protected through a conventional licensing scheme.

You can use AI for simple stuff.

For everything else, there’s open source.

cost will go down 70-90%

Haha, maybe… you can stick your head in the sand all you want, but everyone I know whose output is code is delegating 100% of their work to Claude Code today, I cannot see this magically drawing a line at people whose output is configs and emails…

Stock prices are very forward looking, so if half the hype being sold about AI is true I would expect most software-centric companies to be devalued by wall-street (as the test, deploy, support should be automated in the coming years...according to the AI CEO's).

However, if I was a wall street analyst and believed the AI dreams I would further be concerned that software companies aren't taking advantage of the last remnants of value before software (and maybe labor) values go to zero.

If you've got a gold mine and have recently built the most efficient shovels in the world, why are they not bringing in mass amounts of workers to utilize these shovels before all the neighboring mines. Once all that gold is on the market, the price crashes so it's better to be one of the first mines to get in and dig out all possible value first.

I think you either don't believe in the AI hype, which means a lot of silicon valley companies are tremendously overvalued. Or you do, in which case another huge part of silicon valley is overvalued especially when they are not looking to out-innovate their peers (as evidenced by downsizing), but just riding the wave of AI until what they are selling has no marginal value over some guy coding alone in his bedroom. SV is putting itself into a weird position, but still has some time for financial buffoonery before the party stops.

> > The fear is that these [AI] tools are allowing companies to create much of the software they need themselves.

If that's their fear they don't know much how your typical big businesses functions.

You've dealt with a large, consumer bank? Many of them still run on IBM mainframes. The web front end is driven by pushing buttons and screen scraping 3270 terminal emulators. You would think a bank with all it's resources could easily build it's IT infrastructure and then manage all the technology transitions we've gone through over the past few decades. Clearly, they don't and can't. What they actually do is notice they have to adapt to the newfangled IT threat, hired hordes of contractors to do the work, then fire them when done. After it's done they go back to banking and forget all the lessons they've learnt about building and managing IT infrastructure.

If you want to see how banking and computers should be combined, look at the Fintech's, not banks. But for some reason I don't understand traditional banks still out compete Fintech's. Maybe it's getting your head around both banking and running an IT business it too much for one human mind?

That same pattern is repeated everywhere. Why was everyone so scared of Huawei? It wasn't because they built the gear. It's because the phone telco's have devolved into marketing and finance companies who purchase in the gear from companies like Huawei and rent it out. Amazingly they don't know how to run the gear they purchased, instead get the supplier to install it and maintain it. But that meant what some eyes viewed as an organ of the Chinese communist party was running the countries phones with full access to every SMS and voice call. (Interestingly, IBM pulled the same stunt with the banks back in the day: you didn't buy an mainframe, you leased / rented it from IBM, and they maintained it.)

It's the same story everywhere I look. These big firms stick to the knitting. If you want to see total, utter incompetence in IT go work whose core business doesn't revolve around IT for a while. These are the firms that still choose Microsoft, despite the fact they've seen Sony's Microsoft based IT infrastructure torn apart so badly by North Korea they didn't know who their employees were, how much they owed creditors or how much debtors owned them for a while. Why do they choose Microsoft? Look around - who else allows you to outsource the know how about connecting millions of computing devices in 1000's of offices to a redundant cloud infrastructure that allows them to share data while providing a centralised authentication / authorisation infrastructure. There is only one choice, apart from developing it themselves which is out of the question.

If those businesses did start using what passes for AI today to manage and develop their own IT infrastructure, the result would not be pretty. But for all the shit I'm throwing at them here, I'm confident they are smarter than that. They know their limitations, they haven't done it before, and they won't start doing it now.

> AI-generated code still requires software engineers

No, they don't.

A domain expert armed with an Excel spreadsheet and the ability to write VBA macros will be enough for most business.