Saas isn’t dead, but its business model is on life support.
Right now all everyone around me is talking about is whether Saas is dead or not.
There are currently two distinct camps.
Camp 1: SaaS is dead.
Camp 2: Relax. Nothing’s changing, it’s just a phase.
If you’re in Camp 1, you’re probably liquidating your investment portfolio and building everything in house.
If you’re in Camp 2, you’re probably at the beach, waiting for the storm to pass.
Personally, I’m somewhere in the middle.
SaaS, as we’ve known it, is dying!
Not SaaS products. Not software.
The SaaS business model.
The pricing structures. The cost structures. The go-to-market math. That’s what’s breaking.
and most of the existing Saas leaders, the incumbents won’t survive the shift.
It’s Not Really Build vs Buy (And Here’s Why)
Most think AI is turning this shift into a build vs buy debate.
Camp 1 says:
“Anyone can build any business application with AI. Why pay Salesforce or Workday? Just build it.”
Camp 2 says:
“No serious company will build CRM, HRIS, ERP internally. That’s fantasy.”
The truth is more interesting.
The core change AI is bringing is that it is changing the economics of building software.
AI does not eliminate the need for SaaS.
It’s eliminating the need for 5,000 person SaaS Companies.
Historically, it took thousands of “developer years” to build enterprise grade systems like CRM, HRIS, ERP.
That’s why these companies became massive:
- Huge engineering teams
- Huge implementation arms
- Huge support orgs
The barrier to entry was high, the barrier to compete with the goliaths, was massive.
Now?
AI is compressing development cycles dramatically.
What previously required thousands of man years can increasingly be built by a small, focused team in 18–24 months, especially if you don’t need every edge case feature accumulated over 20 years (And you probably find all that redundant functionality more annoying than helpful)
What customers really need
- The 70–80% of functionality that actually drive value
- Good integrations
- Security
- Reliability
- Cost effective
That’s it.
So Why Doesn’t “Everyone Builds” Win?
Because,
A: You DO NOT have the inhouse knowledge to build your own HRIS, ERP, CRM or project management system
B: Building software fast isn’t the same as owning and maintaining enterprise software long term.
Even if AI reduces build time, you still own:
- Security and compliance
- Regulatory updates
- Infrastructure scaling
- Data migration
- Disaster recovery
- Support
- Continuous improvement
- Integration ecosystem
You become the vendor, and building CRM, HRIS, ERP isn’t your core competency.
Most companies don’t want that.
They want outcomes, not internal product roadmaps for HR or CRM.
The Real Shift Is This:
AI makes it possible for new SaaS companies to build what previously required decades and thousands of engineers.
It does not mean every enterprise should rebuild Salesforce.
It means:
- A 15 person AI native team can now compete with a 5,000 person SaaS incumbent.
- They can reach feature parity faster.
- They can operate at radically lower cost.
- They can price aggressively.
And still be profitable.
That’s the disruption. Not “everyone builds.” But, “anyone who is lean can now build big.”
The new players will sell their CRM, HRIS or ERP for 20% of the cost the incumbents are.
Imagine getting 80% of the value for 20% of the cost, and these SaaS platforms are costly.
It will not make sense anymore to pay $50 / employee for workday (for comparison Shapes, a modern AI native platform starts at $8 / employee) or $100 / rep for Salesforce (Attio starts at $29 / rep)
Incumbents Have a Structural Problem
Legacy SaaS vendors can’t just “drop prices.
They have:
- Massive headcount
- High CAC
- Revenue growth expectations baked into public valuations
- Boards and investors allergic to ASP declines
If Workday cuts ASP by 30% tomorrow, revenue projections would drop and the market would punish them immediately.
So they’re stuck defending pricing.
Meanwhile, new vendors don’t have legacy ASP.
They don’t have bloated cost bases.
They don’t have investor expectations tied to last year’s pricing model.
They start lean. They stay lean.
We’ve Seen This Movie Before
This isn’t theoretical, the pattern has appeared before.
When ServiceNow showed up, ITSM was dominated by BMC Remedy, HP Service Manager, & Peregrine Systems.
ServiceNow was simpler. Cloud native. Easier to implement. Cheaper.
Fast forward 20 years – ServiceNow dominates ITSM. Most of the incumbents are gone or irrelevant.
Same with HRIS – PeopleSoft once had ~40–50% market share in HR systems. Then came Workday and SuccessFactors, cloud first, simpler pricing, different economics.
Within a decade, the center of gravity shifted.
These transitions don’t happen overnight.
They take 7–10 years.
But they do happen.
It took a decade with Saas, I believe it will take far less with AI first Saas vendors.
(BTW, AI first doesn’t mean your team is working with AI, it means your efficient enough so that you can generate $3-5M in revenue for every engineer on your engineering team)