The rise of AI services companies like Invisible and Palantir, which build custom on-prem solutions, marks a reversal of the standardized cloud SaaS trend. Enterprises now prioritize proprietary, custom AI applications to gain a competitive edge.

"Vibe coding" platforms, which allow users to create apps from natural language, pose a direct threat to the B2B SaaS market. For simple workflows, it is becoming faster for a team to build its own personalized app than to navigate the sales, procurement, and integration process for an existing SaaS product.

The barrier to creating software is collapsing. Non-coders can now build sophisticated, personalized applications for specific workflows in under an hour. This points to a future where individuals and teams create their own disposable, custom tools, replacing subscriptions to numerous niche SaaS products.

Companies are now rejecting expensive SaaS contracts because their internal teams can build equivalent custom solutions in days using AI coding tools. This trend signals a fundamental threat to the traditional SaaS business model, as the 'build vs. buy' calculation has dramatically shifted.

AI is becoming the new UI, allowing users to generate bespoke interfaces for specific workflows on the fly. This fundamentally threatens the core value proposition of many SaaS companies, which is essentially selling a complex UX built on a database. The entire ecosystem will need to adapt.

For decades, buying generalized SaaS was more efficient than building custom software. AI coding agents reverse this. Now, companies can build hyper-specific, more effective tools internally for less cost than a bloated SaaS subscription, because they only need to solve their unique problem.

The ease of building applications on top of powerful LLMs will lead companies to create their own custom software instead of buying third-party SaaS products. This shift, combined with the risk of foundation models moving up the stack, signals the end of the traditional SaaS era.

The dominant per-user-per-month SaaS business model is becoming obsolete for AI-native companies. The new standard is consumption or outcome-based pricing. Customers will pay for the specific task an AI completes or the value it generates, not for a seat license, fundamentally changing how software is sold.

For over a decade, SaaS products remained relatively unchanged, allowing PE firms to acquire them and profit from high NRR. AI destroys this model. The rate of product change is now unprecedented, meaning products can't be static, introducing a technology risk that PE models are not built for.