AI is making software functionality accessible through natural language and generative tools, enabling AI versions of products across legal, design, marketing, HR, and healthcare. Plain-English prompts and AI coding tools reduce the need to purchase discrete software products, allowing users to create bespoke solutions. Established SaaS vendors face feature commoditization, erosion of competitive moats, and margin pressure as AI layers replace or subsume functionality. Core systems of record like ERP remain more resilient, but investor concerns have driven significant stock declines for some vendors. Analysts warn incumbents cannot rely on incumbency and must adapt to avoid long-term value erosion.
He predicted software would take over large swaths of the economy, and that's exactly what happened. Books became software, and Amazon beat Barnes & Noble. Movies became software, and Netflix won. Music became software, and Spotify rules over labels. Now, we've entered a new era in which some software companies could be eaten by AI. This technology makes it easier to use and create new software, challenging established SaaS providers and upending business models.
New AI versions of software are popping up in a multitude of sectors, such as legal services, graphic design, marketing, HR, and healthcare. What used to be a discrete software product may now be just a series of requests in plain English typed into a chatbot or AI model. AI coding tools are even making it easier for people to create their own software, rather than buy it.
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