The current AI-driven downturn in SaaS valuations will primarily eliminate low-end, commoditized tools. Large enterprise platforms are protected because implementing AI effectively is complex and requires the deep, trusted C-suite relationships and integration capabilities that incumbents possess.

The narrative that AI will kill SaaS is flawed. AI is more likely to disrupt vertical SaaS applications that are primarily workflow-based. However, horizontal platforms like Salesforce, which act as the central "system of record," become even more critical as the canonical data source for AI agents, strengthening their moat.

As AI makes the software itself easier to build and replicate, the durable value of a SaaS company is no longer the code. Instead, the moat lies in the customer relationship, the proprietary data, the system of record it represents, and the deep understanding of user workflows.

Investor Mitchell Green argues that the fear of AI "vibe coding" away SaaS businesses is overblown. Incumbents like Workday spent decades building trust and deep enterprise integrations, a moat that can't be easily replicated with code alone, regardless of AI's power.

According to Box CEO Aaron Levie, the stickiest SaaS products are those with strong network effects, deep integrations, and mission-critical workflows. A simple heuristic for vulnerability: if you can get the same value from a fresh install as a decade-old one, your product can be easily replaced by AI-generated software.

As AI makes it easier to build custom internal tools, the unique value of SaaS products shifts. Their true defensibility becomes the aggregated knowledge from a broad customer base, allowing them to solve problems with market-wide experience that a single company’s internal tool can’t replicate.

AI is not killing B2B SaaS, but it is fundamentally changing the competitive landscape by making software easier to build. This commoditizes core features, forcing existing SaaS companies to develop unique, defensible moats beyond just code to protect themselves against a new wave of competitors who can quickly "vibe code" similar solutions.

The feared “SaaSpocalypse,” where AI would replace all software companies, largely didn't materialize. Businesses with strong moats beyond just code—such as network effects (Spotify), large sales teams, or being a low-cost, high-value part of a customer's budget (Shopify)—proved resilient against being simply “vibe coded” out of existence.

As AI makes it possible to replicate any SaaS application's features within days, the defensibility of a product no longer lies in its engineering complexity. The real, enduring moat is the network effect, which AI cannot trivially reproduce.