While AI expands software's capabilities, vendors may not capture the value. Companies could use AI to build solutions in-house more cheaply. Furthermore, traditional "per-seat" pricing models are undermined when AI reduces the number of employees required, potentially shrinking revenue even as the software delivers more value.

Building software traditionally required minimal capital. However, advanced AI development introduces high compute costs, with users reporting spending hundreds on a single project. This trend could re-erect financial barriers to entry in software, making it a capital-intensive endeavor similar to hardware.

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.

Government procurement processes are rooted in a pre-digital, paper-based mental model. They treat software like a physical commodity that must be procured anew for each jurisdiction, preventing them from leveraging software's inherent scalability and leading to massive, redundant development costs.

Inefficiency isn't due to corruption but to overworked civil servants making thousands of purchasing decisions annually. Lacking time and modern tools, they default to known vendors to avoid compliance risks, stifling competition and inflating costs for taxpayers.

To minimize risk, government contracts often require bidders to have prior experience building the exact same system. This seemingly prudent rule creates a catch-22, barring new entrants and locking in a small number of incumbents who can then dominate the market and inflate prices.

The government's core model for funding, oversight, and talent management is a relic of the post-WWII industrial era. Slapping modern technology like AI onto this outdated 'operating system' is a recipe for failure. A fundamental backend overhaul is required, not just a frontend facelift.

The defense procurement system was built when technology platforms lasted for decades, prioritizing getting it perfect over getting it fast. This risk-averse model is now a liability in an era of rapid innovation, as it stifles the experimentation and failure necessary for speed.

Government agencies without in-house technical expertise are at the mercy of contractors who inflate costs. Hiring even one skilled software engineer provides the capacity to call a vendor's bluff, potentially saving millions by demonstrating that a requested "million-dollar fix" is actually a 30-minute task.