Permira's analysis suggests AI can replicate software features, eroding the value of high switching costs and recurring revenue. The new moat is whether a company owns critical data or is deeply embedded in workflows.

When asked if AI commoditizes software, Bravo argues that durable moats aren't just code, which can be replicated. They are the deep understanding of customer processes and the ability to service them. This involves re-engineering organizations, not just deploying a product.

The long-held belief that a complex codebase provides a durable competitive advantage is becoming obsolete due to AI. As software becomes easier to replicate, defensibility shifts away from the technology itself and back toward classic business moats like network effects, brand reputation, and deep industry integration.

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.

Software's main competitive advantage isn't code, but its deep integration into customer data and workflows, creating high switching costs. AI threatens this moat by automating those integrated tasks, reducing customer stickiness and pricing power.

With AI commoditizing code creation, the sustainable value for software companies shifts. Customers pay for reliability, support, compliance, and security patches—the 'never ending maintenance commitment'—which becomes the key differentiator when anyone can build an initial app quickly.

AI can generate code, but the real value of enterprise software is its integration into complex human workflows, the massive costs of change management, and network effects. These human-centric problems create a durable moat that code generation alone cannot overcome.

The fear that AI agents will kill SaaS is overblown. Corporations will not replace mission-critical, supported software with AI-generated code from junior employees. The need for vendor accountability, reliability, and support creates a durable moat for enterprise software companies.

AI coding tools struggle to replace entrenched niche software because AI lacks access to private client data and cannot provide the liability and support needed for mission-critical operations. The software's cost is often trivial compared to the operational risk of replacing it.