The primary threat from AI disruptors isn't immediate customer churn. Instead, incumbents get "maimed"—they keep their existing customer base but lose new deals and expansion revenue to AI-native tools, causing growth to stagnate over time.

Disruptive AI innovations are counter-positioned against traditional seat-based SaaS pricing. Incumbents struggle to pivot because it would make them deeply unprofitable, spook investors, and require a complete cultural rewiring. This organizational inertia, not a technology gap, is their biggest vulnerability to AI-native startups.

For established software companies with sluggish growth, the path forward is clear: find a way to become relevant in the age of AI. While they may not become the next Harvey, attaching to AI spend can boost growth from 15% to 25%, the difference between a viable public company and a sale to a private equity firm.

While overall enterprise software spending is hitting record highs, this growth is not a rising tide for all. Half the increase is consumed by existing vendors' price hikes and 30% is allocated to new AI initiatives, leaving minimal budget for traditional SaaS tools.

Enterprise software budgets are growing, but the money is being reallocated. CIOs are forced to cut functional, "good-to-have" apps to pay for price increases from core vendors and to fund new AI tools. This means even happy customers of non-mission-critical software may churn as budgets are redirected to top priorities.

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.

The current market leaves no room for mediocrity. SaaS companies are either at the forefront of AI, delivering jaw-dropping value and capturing new budget, or they are being displaced. Hiding behind long-term contracts is a temporary solution, as there is no longer a middle ground.

The lucrative maintenance and migration revenue streams for enterprise SaaS, which constitute up to 90% of software dollars, are under threat. AI agents and new systems are poised to aggressively shrink this market, severely impacting public SaaS companies' incremental revenue.

Incumbent SaaS companies like Salesforce are cutting off API access to prevent AI startups from siphoning value. To build a durable business, new AI companies cannot simply be a "system of action" on top of old platforms; they must aim to become the new system of record, which requires building complex data migration tools from day one.