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.
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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.
AI is making core software functionality nearly free, creating an existential crisis for traditional SaaS companies. The old model of 90%+ gross margins is disappearing. The future will be dominated by a few large AI players with lower margins, alongside a strategic shift towards monetizing high-value services.
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.
In the age of AI, 10-15 year old SaaS companies face an existential crisis. To stay relevant, they must be willing to make radical changes to culture and product, even if it threatens existing revenue. The alternative is becoming a legacy player as nimbler startups capture the market.
AI will fundamentally change user interfaces. Instead of designers pre-building UIs, AI will generate the necessary "forms and lists" on the fly based on a user's natural language request. This means for the first time, the user, not the developer, will be the one creating the interface.
In the future, it will be easier for businesses to build their own custom software (e.g., Salesforce) through prompting than to buy and configure an off-the-shelf solution. This shift towards "liquid software" will fundamentally challenge the one-size-fits-all SaaS model, especially for companies that currently rely on implementation partners.
The fundamental shift from AI isn't about replacing foundational model companies like OpenAI. Instead, AI creates a new technological substrate—productized intelligence—that will engender an entirely new breed of software companies, marking the end of the traditional SaaS playbook.
Sierra CEO Bret Taylor argues that transitioning from per-seat software licensing to value-based AI agents is a business model disruption, not just a technological one. Public companies struggle to navigate this shift as it creates a 'trough of despair' in quarterly earnings, threatening their core revenue before the new model matures.